This is an exciting time in the medical technology industry and it’s especially exciting to be at Medtronic. Our innovations are truly changing lives … and helping improve healthcare around the world.
The story of Medtronic began … like so many great entrepreneurial companies … in a garage.
This garage was in Minneapolis, Minnesota, where brothers-in-law Earl Bakken and Palmer Hermundslie started a medical equipment repair business in 1949. Earl was an electrical engineering student at the time. He was repairing medical equipment at nearby hospitals … just as a favor to physicians, because they had few other options. He realized there was an unmet need that matched his skills, and Medtronic was born.
Increasingly, Earl was asked to not just repair equipment, but to make it more effective. Being an inventor at heart, Earl was more than happy to collaborate and come up with something better. One of Medtronic’s most famous collaborations was in 1957. Well-known University of Minnesota cardiac surgeon Dr. C. Walton Lillehei asked Earl to create a battery-operated pacemaker. At the time, pacemakers were bulky, external boxes that sat on a cart and had to be plugged into a wall socket. But what happened if there was a power outage? Dr. Lillehei wanted a more reliable pacemaker, and Earl created one … making history and transforming Medtronic from a medical equipment REPAIRER to a MANUFACTURER.
In 1960, there were two events that further changed the face of Medtronic. Earl obtained the rights to manufacture and distribute implantable pacemakers. In the same year, Medtronic overextended itself and essentially went bankrupt. So Earl went to the Board of Directors to ask for help and the Board, in its wisdom, required that Earl write down what the company was about and how to refocus efforts.
What came out of this process was the Medtronic Mission. To contribute to human welfare by application of biomedical engineering … To direct our growth in the areas of biomedical engineering … To strive without reserve for the greatest possible reliability… To make a fair profit … To recognize the personal worth of employees … And To maintain good citizenship… Not a word of the Mission has changed since Earl wrote it. Nearly a half-century later, the Mission continues to serve as our ethical framework and an inspirational goal for employees around the world.
Over the years, we’ve expanded our capabilities and started serving many more countries, growing into the world’s largest medical technology company. So let’s look at who we are today.
Here’s a quick snapshot of Medtronic today.
We’ve had consistent sales growth over the years, which gives us the financial resources needed to continue to fulfill our Mission.
We’re in several diverse businesses that span major technology platforms and allow us to treat a broad range of medical conditions.
Our revenue comes from many different therapy areas, which address a wide range of the world's most pressing chronic conditions.
We serve 120 countries from more than 300 locations, and most of our business outside the United States is in developed countries … like Japan and the European Union nations.
But in the future, as we make a concerted effort to help fight chronic disease in emerging markets like China and India, we see more of our growth coming from those countries.
Let’s look closer at exactly what Medtronic does.
With our broad platform of core technologies, we’re able to alleviate pain, restore health, and extend life.
Our core technologies are the foundation of our therapies, which address many of the world’s most pressing chronic diseases ... including Parkinson’s disease, heart failure, coronary artery disease, and diabetes.
Our Cardiac and Vascular group includes these key businesses.
Our Cardiac Rhythm therapies address heart rhythm disorders, such as a slow or fast heart rate. Some of our solutions include atrial fibrillation diagnostic and remote heart device monitoring.
Our endovascular products include stent grafts for treating aortic aneurysms and balloon angioplasty therapies for treating peripheral arterial disease.
Our structural heart therapies include products for repairing and replacing heart valves and innovative products for coronary artery bypass surgery.
We have products on the market for treating coronary artery disease.
Our Restorative Therapies Group includes these businesses.
Our Spine and Biologics products include mechanical and biological therapies for spinal conditions like scoliosis and decaying discs, as well as other musculoskeletal issues such as tibial .. or shin bone fractures .. and jaw bone restructuring.
Our Neuromodulation therapies address conditions including movement disorders and chronic pain.
We also have Neuromodulation therapies to treat urinary disorders, like incontinence.
Our Diabetes business provides insulin pumps and related products … such as glucose monitoring systems and information technologies … to help manage diabetes over the long term.
ENT products are within our Surgical Technologies business, providing surgical tools for addressing major ear, nose, and throat conditions, including sinus diseases, ear disorders, and tonsillectomies.
Our Surgical Technologies business also provides Navigation and Imaging tools that help surgeons plan for surgeries and see inside the body during surgeries.
So what motivates us to continually develop new medical innovations? If you look at global healthcare trends, you can see the new realities we’re dealing with as a society.
As our CEO, Omar Ishrak, says: “ Across the world, we are in a continuous quest to improve healthcare. People everywhere want better outcomes, fewer errors, quicker recoveries, and fewer side effects. We’re developing medical technology solutions that not only improve healthcare, but do so while delivering better economic value.”
There are current healthcare trends that are affecting global economies and undermining the development of emerging countries, including underserved populations, increased life expectancy, increase in chronic disease, and the rising cost of healthcare.
There are still many underserved patient populations around the world, especially outside the United States, and for certain conditions, such as abdominal aortic aneurysm, diabetes, and neurological conditions.
Our aging society will continue to drive demand for medical technology across the globe. By the year 2050, it’s projected there will be more than 5 million people worldwide who are age 100 or older.
Another issue driving healthcare demand is the increase of chronic, noncommunicable diseases such as diabetes and cardiovascular diseases. They account for more deaths than any other cause and total 75% of healthcare costs. We must develop new, more efficient ways of managing chronic disease over the long term in order to reverse this devastating global trend.
With the rise in chronic diseases comes a rise in overall healthcare costs. It’s been estimated in the United States that healthcare costs will continue to compound at 7 to 8%. By focusing our efforts on improving the largest contributor to healthcare costs … chronic disease treatment … we can make a significant impact on healthcare.
To do that, we’re addressing these new realities head on … by expanding the benefits of our work. We’re developing therapies with demonstrated economic value, clinical outcomes and positive impacts on society.
So how are we helping address all these major healthcare issues?
We’re helping advance the way the world treats chronic disease through these four key innovation platforms: Smarter Solutions is about developing innovative therapies that restore, enhance, and save lives. Connected Care is about using information technologies to better link patients and physicians so they can make better decisions and improve care. Open Collaboration is about collaborating across the entire healthcare industry to implement better practices, business models, and policies. Borderless Commitment is about pushing boundaries for better access to needed therapies around the world.
Historically, our therapies focused on treatment of an existing medical condition. But we’re branching out to cover more along the patient care continuum … to help healthcare providers identify individuals who need therapies earlier … and using information technologies to help physicians and patients better manage chronic disease and control costs over the long term.
To expand our offerings further along the care continuum, we’re combining our core technologies in new ways.
By combining our medical devices with medications and biologics, we can deliver the medications to precise areas of the body where they’re needed. Our drug-coated stent is used to treat patients with coronary vascular disease. The stent keeps the artery open and the drug coating is slowly released to help prevent the artery from re-clogging. A pain pump delivers a therapeutic drug to a fluid-filled area around the spinal cord to treat chronic pain. And a bone morphogenetic protein, or BMP, stimulates the body to regrow bone. It’s used for treating certain lumbar … or lower spine conditions.
Most of our procedures involve some sort of surgical intervention. Our objective is to make those interventions shorter, more predictable and less invasive to the body — to shorten the length of surgery and speed healing time. This example compares a traditional coronary artery bypass grafting procedure in the lower right with our minimally invasive alternative that requires a much smaller incision.
We’re also exploring therapies to address many more conditions that we don’t treat today. Note that none of these therapies are approved. We’re just in the very early stages.
To give you an idea of our extensive product development scope, we have more than 1,500 clinical and research scientists working on over 350 clinical trials around the world at any one time, representing more than $300 million in investments.
In addition to developing our own therapies, we also acquire existing therapies where it makes strategic sense. You can see from this chart that acquisitions have increased over the years as a way to help us bring needed therapies to patients sooner.
A good example of how we are advancing our work along the care continuum is our CareLink device monitoring service. By incorporating sensors and monitors into our products, they can send data to a CareLink monitor, which then securely transfers that data to healthcare teams, so they can review it, and better monitor and treat patients.
Any discussion of our solutions isn’t complete without talking about product quality and patient safety. Medtronic’s quality vision is to be the company most trusted to deliver products, processes, services and relationships. As such, we have an enterprise-wide quality strategy, and processes and measures in place to ensure safety at every stage of the product lifecycle.
We partner with physicians and other healthcare professionals to develop better business practices AND better products. In addition to helping us develop products, physicians play an integral role in training other physicians on the safe and effective use of our products. They also serve as advisors when it comes to product reliability or usability. To preserve these valuable partnerships, Medtronic has been leading an industry-wide transparency effort … developing Principles, Standards, and Approaches that guide our physician partnerships and ensure they’re conducted appropriately.
We take our position as a community leader very seriously and use five pillars to guide our global citizenship efforts. In fact, the sixth tenet of the Medtronic Mission is “to maintain good citizenship as a company.” As a sign of our commitment, we report our economic, social and environmental performance annually, using the Global Reporting Initiative framework as our guide.
Because of the focus we put on employees, we’re recognized around the world as being an Employer of Choice … a place where people want to work.
Ultimately, our work is about improving people’s lives through medical technology. In fact, every 4 seconds, another person’s life is enhanced because of a Medtronic product or therapy.
Collaborating with Physicians to Develop Life-Changing Therapies
1960 Was a Seminal Year The First Implantable Pacemaker Potential Bankruptcy and the Mission
An Enduring MissionTo contribute to human welfareby application of biomedicalengineering …To direct our growth in theareas of biomedicalengineering …To strive without reserve for thegreatest possible reliability…To make a fair profit …To recognize the personalworth of employees …To maintain good citizenship… Our founder Earl Bakken with medallion
Global Leader in Medical Technology 45,000+ employees, making us the largest global medical technology company 9,000+ scientists and engineers around the world FY12 patents awarded, bringing our 2,060+ total worldwide to more than 23,000 FY12 global sales from continuing $16.2B operations which generate $3.9B in free cash flow* ~45% sales from international markets, representing more than 120 countries* Free cash flow is operating cash flow minus capital expenditures
Diverse Businesses to Treat Many Conditions Diabetes Spine & Biologics CardioVascular Neuromodulation Surgical CRDM Technologies
Diverse Revenue Sources RESTORATIVE THERAPIES GROUP CARDIAC AND VASCULAR GROUP Surgical Technologies Diabetes CRDM Neuromodulation Spine & Biologics CardiovascularBased on FY2012 revenues of $16.2 billion
Serving the World’s Major Geographies Central/Eastern Western Europe Europe/ United Greater Canada States China Middle Asia East/Africa Latin America India Countries 120+ Locations 300+
Future Growth Driven by Emerging Markets Central & Eastern Percent of Revenue Estimated Percent of Revenue Europe in FY12 in coming years Middle East Africa 90% 10% 80% 20% Latin America Asia (Excluding Japan and Korea)
Endovascular Therapies Aortic aneurysms Stent grafts Peripheral arterial disease Stents and other angioplasty technologies For full safety information, visit medtronic.com
Structural Heart Surgical and minimally-invasive valve replacement (tissue) Valve disease Surgical valve replacement (mechanical) Surgical valve repair products Conditions requiring cardiac surgery such as Cardiopulmonary, revascularization, and pediatric perfusion coronary artery bypass grafts or products cardiopulmonary bypass For full safety information, visit medtronic.com
Coronary and Renal Denervation Angioplasty technologies, including drug-eluting Coronary artery disease and bare metal stents and balloon catheters* Not approved for commercial distribution in the United States For full safety information, visit medtronic.com
Restorative Therapies Group Overview Spine and Biologics Neuromodulation Restorative Therapies Group Diabetes Surgical Technologies
Spine and Biologics Spinal deformities Fusion systems, powered surgical tools, navigation and imaging systems Herniated discs Minimal access spinal technologies (MAST), artificial discs Fusion systems, MAST procedures, artificial discs, bone morphogenetic Degenerative disc disease proteins, powered surgical tools, navigation and imaging systems Balloon kyphoplasty, powered surgical tools, navigation Vertebral compression fractures and imaging systems Acute, open tibial fractures Bone morphogenetic proteins Certain oral-maxillofacial conditions Bone morphogenetic proteins Lumbar spinal stenosis Interspinous process decompression devices For full safety information, visit medtronic.com
Neuromodulation Movement disorders Implantable deep brain stimulation systems, drug-infusion systems Obsessive-compulsive disorder* Implantable deep brain stimulation systems Chronic pain Implantable neurostimulation systems, drug-infusion systems* Humanitarian Device in the United States – the effectiveness for this use has not been demonstrated For full safety information, visit medtronic.com
Neuromodulation Overactive bladder/urinary Implantable sacral neuromodulation systems retention/chronic fecal incontinence Nausea and vomiting associated Implantable gastric stimulation systems* with gastroparesis* Humanitarian Device in the United States – the effectiveness for this use has not been demonstrated For full safety information, visit medtronic.com
Diabetes Insulin delivery External insulin pumps Personal and professional continuous glucose Glucose monitoring monitoring systems Online tool that simplifies diabetes management Therapy management software by providing clear insights into personal glucose patterns For full safety information, visit medtronic.com
Ear, Nose, and Throat Conditions Powered surgical tools, navigation and nerve monitoring systems, Sinus diseases postoperative packing Thyroid conditions Intraoperative nerve monitoring equipment and surgical tools Surgical drills, middle ear prostheses, nerve monitoring and navigation Otologic and neurotologic disorders systems, Ménière’s disease therapy Sleep-disordered breathing Implantable devices for palatal stiffening and tongue suspension Pediatric conditions Tonsillectomy and adenoidectomy surgical tools; vent tubes Skull base tumors Powered surgical tools; specialized manual instruments; nerve monitoring and lesions and navigation systems For full safety information, visit medtronic.com
Surgical Technologies Plan for and confirm Surgical imaging systems advanced surgical procedures Perform surgeries in parts of the body Navigation systems where direct vision is not possible Implantable valves and shunts, navigation and Hydrocephalus imaging systems High-speed surgical drills and tools, navigation and Cranial surgery imaging systems, cranial repair devices For full safety information, visit medtronic.com
Improving Healthcare “Across the world, we are in a continuous quest to improve healthcare. People everywhere want better outcomes, fewer errors, quicker recoveries, and fewer side effects. We’re developing medical technology solutions that not only improve healthcare, but do so while delivering better economic value.” | OMAR ISHRAK, Chief Executive Officer
Global Trends Affecting Healthcare Underserved Populations Increased Life Expectancy Increase in Chronic Disease Rising Cost of Healthcare
Many Populations Still Underserved100% US Penetration Int’l Penetration 0Source: Internal Medtronic analysis
Life Expectancy in 2050 Age 60+ 2 Billion* Age 80+ 440 Million * Age 100+ 5 Million *Source: U.S. Census Bureau, International Data Base (IDB), June 2011* Estimated Worldwide Population by the Year 2050
Chronic Disease Becoming a Global Epidemic Number 1 Cause Accounts for Majority of of Death HealthCare Costs 40% Other 25% 60% Causes 75% Other Causes Chronic, Chronic, Noncommunicable Noncommunicable Diseases DiseasesSource: U.S. Census Bureau, International Data Base (IDB), June 2011
The Need to Curb Rising Healthcare Costs U.S. Health Expenditures
Expanding the Benefits of Our Work Economic Value Clinical Societal Impact We are committed to Outcomes We’re working to innovative solutions reduce the global With quality and safety that help advance burden of chronic patient care and leading our processes, we strive toward disease by improving provide better value treatment, delivery, for our customers by improved efficacy and patient outcomes. and access to driving efficiencies throughout the therapies worldwide. healthcare system.
Innovation Platform to Address Healthcare Issues Smarter Connected Solutions Care Better Therapies for Linking Patients and Better Outcomes Physicians for Better Care Open Borderless Collaboration Commitment Better Practices for Pushing Boundaries for Healthy Business Better Access
Providing Therapies Across More of the Care Continuum Targeted Treatment Chronic Disease Diagnostics Management Better selection of patients Earlier intervention and Better long-term management who need therapies individual treatment plans to improve lives and control costs
Combining Core Technologies for Greater Impact Information Technology Engineering Sciences Life Sciences
Adding Drug/Biologics for Targeted Delivery For full safety information, visit medtronic.com
Making Procedures Less Invasive Minimally Invasive CABG Traditional CABG For full safety information, visit medtronic.com
Developing Therapies to Address More Conditions * Obesity Chronic Migraine Amyotrophic Lateral Sclerosis Depression Alzheimer’s Disease Spinal Cord and Traumatic Brain Injury Huntington’s Disease Periodontal Disease Neck Pain Dysphagia Acute Back Pain Valvular Heart Disease Aging Spinal Disease Atrial Fibrillation Vertebral Disc Augmentation Preventing Arterial Plaque Rupture Post-Surgery Pain Acute Leg Pain* These concepts are in early development; their successes and risk shave not been evaluated.
Offering More Therapies Through Acquisitions 1949-1984 1985-1989 1990-1994 1995-1999 2000-2004 2005-Today Acumen Setagon United States Catheter and Instrument (USCI) Nobles Medical Image-Guided Neurologics (IGN) AneuRx Paceart Transneuronix (TNI) Avalon Laboratories AtreoCameron-Miller Surgical Endonetics Instruments CardioRhythm Midas Rex Jolife PercuSurge Restore Medical Medical Data DLP Physio-Control PEAK Surgical Systems Vitatron VidaMed Lifelink MD Synectics Medical Bio-Medicus Osteotech Cardiocare Johnson & Sofamor Danek Spinal Dynamics Kyphon Johnson’s Tissue Valve Carbon Implants Medical Designs and Oxygenator Micro Motion Sciences Vertelink International Medical Biophan Corporation Business Electromedics Xomed Restoragen MiniMed/MRG Breakaway Imaging Interventional Medical PS Medical Avecor Transvascular Andover Medical Inc. Invatec Arterial Vascular CoreValve The Eliminator from Versaflex Micro Interventional Engineering (AVE) Radius Medical Odin Medical American Edwards Systems (MIS) Ardian Laboratories Division Instent Coalescent Surgical Natrix Bio Tech Surgical Navigation Angiolink Millenium Biologix Technologies InfluENT Medical TUR Intelex Salient Surgical Technologies Ablation Frontiers Ventor Technologies CryoCath PreciSense Axon Systems ATS Medical
Information Technology to Monitor Patients For full safety information, visit medtronic.com
Partnering with Physicians to Enhance Solutions and Quality Product Research & Development Training & Education Advisory Services Royalties
Corporate Citizenship is Central to our Mission Global Leadership in Collaborative Responsibility Total Progressive Addressing Culture of in the Employee Environmental Chronic Innovation Marketplace Engagement Stewardship Disease