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Stj 2016 analyst and investor day presentation v2


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Stj 2016 analyst and investor day presentation v2

  2. 2. WELCOME AND OPENING REMARKS Mike Rousseau, President and CEO 2
  3. 3. This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Such forward-looking statements include the expectations, plans and prospects for the Company, including potential clinical successes, reimbursement strategies, anticipated regulatory approvals and future product launches, and projected revenues, margins, earnings and market shares. The statements made by the Company are based upon management’s current expectations and are subject to certain risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include market conditions and other factors beyond the Company’s control and the risk factors and other cautionary statements described in the Company’s filings with the SEC, including those described in the Risk Factors and Cautionary Statements sections of the Company’s Annual Report on Form 10-K for the fiscal year ended January 3, 2015 and Quarterly Report on Form 10-Q for the fiscal quarter ended October 3, 2015. The Company does not intend to update these statements and undertakes no duty to any person to provide any such update under any circumstance. The Company will be using non-GAAP financial measures (e.g., constant currency sales growth, adjusted net earnings, etc.) in this presentation. Investors should consider non-GAAP measures in addition to, and not as a substitute for, financial performance measures prepared in accordance with GAAP. For a reconciliation of our non- GAAP financial measures to our GAAP results, please see the Company’s Current Report on Form 8-K furnished January 27, 2016. FORWARD-LOOKING STATEMENTS AND DISCLOSURES 3
  4. 4. 8:00AM Driving Growth Through Innovation Mike Rousseau, President and Chief Executive Officer Thoratec Integration: A Priority for 2016 Rachel Ellingson, V.P., Corporate Strategy Heart Failure: Medical Technology Leadership Eric Fain, M.D., Group President John O’Connell M.D., Medical Director, Mechanical Circulatory Support and V.P., Medical Affairs Panel for Q&A ~10:00AM Break Atrial Fibrillation: Platform and Pipeline for Global Innovation Leadership Phil Ebeling, V.P. and Chief Technology Officer Traditional CRM: A Path to Recovery in the U.S. Eric Fain M.D., Group President Neuromodulation: Building the Most Comprehensive Portfolio Keith Boettiger, Senior V.P. & General Manager, Chronic Pain & Movement Disorder Therapies Cardiovascular: Products to Watch in 2016 Phil Ebeling, V.P. and Chief Technology Officer Panel and Q&A 12:00PM Meeting Ends AGENDA 4
  5. 5. OUR COMMITMENT TO CUSTOMERS Target expensive epidemic disease states by surrounding the patient care continuum with innovative products that offer clinical and economic advantages 5
  6. 6. Growth Heart Failure Low/Mid SD Atrial Fibrillation Low-teens Neuromodulation Mid/High SD Traditional CRM Flat Cardiovascular High-single/Low-teens OUR MARKETS FOR 2016 EXCEED $23 BILLION IN SIZE AND ARE GROWING MID SINGLE DIGITS* >$4B >$2B >$4B ~$7B >$6B Atrial Fibrillation Neuromodulation Heart Failure Traditional CRM Cardiovascular All dollar market sizes are based on estimated revenues St. Jude Medical market estimates * Excludes the impact from currency Low/Mid SD- Low to middle single digit percent growth Low-teens - Low teens percent growth Mid/High SD-Middle to high single digit percent growth High-single/Low-teens percent growth Flat ~0% 6
  7. 7. Atrial Fibrillation (AF): We understood early on that ultimately curing AF would require a “tool box” approach  Over time, we have created the most comprehensive product portfolio in the industry Heart Failure: We are on the front lines of developing the multi-billion dollar heart failure device market  We are uniquely able to offer products that improve patient care – from early symptoms to advanced heart failure, regardless of type  The recent acquisition of Thoratec adds the market leading portfolio of left ventricular assist devices Neuromodulation: We are the global innovation leader with a portfolio that spans the continuum of care for chronic pain patients  STJ proprietary SCS Burst therapy* provides superior pain relief vs. tonic for overall, trunk, and limb pain  STJ’s proprietary Dorsal Root Ganglion therapy* is superior to tonic relief for targeted pain syndromes SURROUNDING DISEASE STATES 7*Caution - INVESTIGATIONAL DEVICE, LIMITED BY FEDERAL (OR UNITED STATES) LAW TO INVESTIGATIONAL USE.
  8. 8.  Healthcare remains a largely fee-for-service market  Economic incentives need to change for providers to truly transition to fee-for-value  Industry needs to address both ends of the spectrum  We are living this paradigm with technologies like CardioMEMS/Fractional Flow Reserve (FFR)  We are working with customers during this transition to provide tailored solutions Markets around the world are evolutionary not revolutionary when it comes to the paradigm shift from fee-for-service to fee-for-value ADDRESSING AN EVOLVING HEALTHCARE LANDSCAPE FFS = fee-for-service / FFV = fee-for-value FFS FFV 8
  9. 9. 9  In 2012 we saw: our markets changing, hospitals consolidating, payment models transitioning, pricing pressures mounting  How can STJ compete and win in that environment?  Target expensive epidemic disease states and deliver innovation to transform treatment in those markets  Surround patient care continuum with products that offer clinical and economic advantages  Provide solutions to our customers that address their needs in an evolving healthcare landscape  And transition from a highly decentralized structure to ONE SJM (end of 2012)  Agility being critically important  Resources must be optimized across organization OUR DECISION TO EVOLVE OUR STRUCTURE
  10. 10.  Aligned priorities ensure global organization focused on the right things  Shared resources across our organization – able to make decisions based on company-wide goals rather than individual division goals  Faster decision making and ability to course correct – agility is critically important  Operating leverage through global supply chain  Drives increased collaboration and communication without expense of traditional business silos  Cultural alignment – employees working together to achieve our vision and mission  Integration as a competitive advantage  Selling divisions can focus on selling – organized the way customers make purchasing decisions  Contracting resources within selling teams across cardiovascular service line OUR STRUCTURE SUPPORTS OUR STRATEGY Functional Centers of Excellence Geographic and Key Accounts Sales Teams 10
  11. 11. 11 Atrial Fibrillation:  Addressed ablation catheter gap and now adding a highly competitive advanced mapping system with a full set of tools  EnSite Precision* – 18 months from development to launch  FlexAbility SE Catheters** Neuromodulation:  Transformed neuromodulation business through internal investment and acquisitions by reallocating significant resources  Launching most comprehensive portfolio in 2016 Heart Failure:  Identified challenges in treatment paradigm and invested resources to become medical technology leader  HeartMate LVAD / CardioMEMS opportunities in 2016; MultiPoint™ Pacing*** for non- responders ONE SJM – MANY BENEFITS *510K pending **PMA-S pending ****Caution - INVESTIGATIONAL DEVICE, LIMITED BY FEDERAL (OR UNITED STATES) LAW TO INVESTIGATIONAL USE.
  12. 12. 2016 GOALS 12
  13. 13.  Establish U.S. reimbursement for CardioMEMS nationwide  Successfully integrate our Thoratec acquisition  Execute the plan for recovery in U.S. CRM  Successfully launch key products to drive sales growth Where we focus…We win SETTING MEASURABLE GOALS IN 2016 13
  14. 14.  We have clear evidence that pulmonary artery pressure-guided heart failure management is superior to clinical assessment alone  Recent The Lancet publication: 48% reduction in HF hospitalizations at 31 months  CMS established new technology add-on and pass-through pathway payments  We have submitted our application to CMS for a National Coverage Determination  We will also continue to work with national private payers and regional MACs  Our commercial experience has continued to demonstrate strong patient benefits and there is tremendous support from the implanting community  Clinical evidence continues to grow and outcomes are as good as – or better than – those observed in CHAMPION ESTABLISH U.S. REIMBURSEMENT FOR CARDIOMEMS 14
  15. 15.  Thoratec represents the largest acquisition in the history of St. Jude Medical  Added the broadest portfolio of mechanical circulatory support devices to treat the full range of clinical needs for patients suffering from advanced heart failure  Integration team and priorities were established early  Appointed an executive sponsor, dedicated senior leader and cross-functional team to ensure stability within both organizations  Continued business momentum demonstrated with revenue growth and clinical study execution A TOP PRIORITY FOR ST. JUDE MEDICAL HeartMate 3™ System* HeartMate PHP™ System* 15*Caution - INVESTIGATIONAL DEVICE, LIMITED BY FEDERAL (OR UNITED STATES) LAW TO INVESTIGATIONAL USE.
  16. 16.  Upcoming launches will fill product gaps as well as deliver technology advancements  Allow STJ to compete at the premium tier of contract negotiations  Enhanced AF, HF and CRM portfolios provide unique opportunities when contracting with customers  First half of 2016:  Assurity MRI™ Pacemaker* in the U.S.  MRI labeling for existing ICD’s in Japan  MRI safe Ellipse™ ICD approved on February 2, 2016  Second half of 2016:  Nanostim™ Leadless Pacemaker*  MultiPoint™ Pacing*, advanced diagnostics, next generation Confirm™ insertable cardiac monitor** OUR PATH TO RECOVERY IN CRM BEGINS WITH UPCOMING LAUNCHES 16*Caution - INVESTIGATIONAL DEVICE, LIMITED BY FEDERAL (OR UNITED STATES) LAW TO INVESTIGATIONAL USE **Product not available for sale; remains in development
  17. 17. SIGNIFICANT INVESTMENT IN FUTURE INNOVATION Notable 2016 Investments:  Portico™ IDE trial: Over 1,200 randomized subjects*  Heartmate PHP™ Shield II trial: 425 patients*  Initiate Amplatzer Amulet IDE study  Initiate EnligHTN Renal Denervation IDE study  Dual chamber leadless pacing development work  Next-generation LVAD technology  Next-generation Confirm™ insertable cardiac monitor** Portico™ Transcatheter Aortic Valve EnligHTN™ multi-electrode renal denervation system Nanostim™ leadless pacemaker Confirm™ Insertable Cardiac Monitor 17 *Caution - INVESTIGATIONAL DEVICE, LIMITED BY FEDERAL (OR UNITED STATES) LAW TO INVESTIGATIONAL USE. **Product not available for sale; remains in development
  18. 18. INCREASING SHAREHOLDER VALUE  Intensify our FOCUS by surrounding disease states  Heart Failure, Atrial Fibrillation, Neuromodulation  Prioritizing programs and resources to surround care continuum  Continue to invest in INNOVATION to raise standards of care  Innovation leadership is our competitive advantage  Leverage CRM technology portfolio and expertise  Further develop ONE SJM CULTURE to mobilize employees  In support of our mission; driving productivity, commitment and teamwork  Strengthen EXECUTION and grow markets and sales  Product launches, market development and operating leverage  Deliver on EXPECTATIONS of our stakeholders  Doing what we say we are going to do 18
  19. 19. THORATEC INTEGRATION: A PRIORITY FOR 2016 Rachel Ellingson, V.P., Corporate Strategy 19
  20. 20.  Together as one company, we offer patients and physicians the most comprehensive portfolio of products across the heart failure (HF) care continuum  Expand the reach of left ventricular assist devices (LVADs) for advanced stage HF  Integrate our technologies for improved therapy options  Leverage our global presence and enter new markets  Together we will lead the industry in heart failure management BUILDING THE WORLD LEADER IN HEART FAILURE MANAGEMENT 20
  21. 21.  Full integration of Thoratec within the STJ global structure  The integration team is focused on:  Collaboration  Momentum  Organization  Culture  Speed INTEGRATION GUIDING PRINCIPLES 21
  22. 22.  Maintain business momentum and leverage STJ’s expertise in HF, size and distribution network as quickly as possible  Drive revenue growth through scale and by offering customers the broadest portfolio of HF products  Deliver exceptional customer experience  Drive innovation leadership and doing so more efficiently through STJ technology platform capabilities  Leverage cost and productivity synergies through integrated operations, distribution and infrastructure  Implement “One St. Jude Medical” for organizational design and cultural alignment  Identify and grow top talent across the business INTEGRATION PRIORITIES 22
  23. 23.  Cultural alignment is a critical success factor in any merger or acquisition  St. Jude Medical and Thoratec have a shared commitment to:  Patients  Customers  Delivering innovation to save and improve lives  Our cultures have many areas of alignment – we expect to grow stronger together by leveraging our differences CULTURAL ALIGNMENT 23
  24. 24.  Revenue diversification and broader scale to our heart failure program  Business momentum continues with Q4 revenue beating expectations  Significant progress on cross-training sales and clinical resources  Revenue and cost synergies overachieving deal model  Provides incremental operating leverage and significant accretion in 2016 estimated to be approximately $0.20 per share  Operational improvements  Manufacturing optimization and site consolidation  Joint cross-functional integration team in place and performing well  Functional integration plans have been developed  All employees reporting in “One St. Jude Medical” structure PROGRESS 24
  25. 25. Q1 2016 Executing functional integration plans; key infrastructure milestones October 8 Acquisition completed; Integration kick-off First 60 Days One STJ reporting; 2016 AOP developed; Key site decisions made Mid-2016 Fully functioning as an integrated business INTEGRATION CADENCE 25
  26. 26. HEART FAILURE: MEDICAL TECHNOLOGY LEADERSHIP Eric Fain, M.D., Group President John O’Connell M.D., Medical Director, Mechanical Circulatory Support and V.P., Medical Affairs
  27. 27. 27 HEART FAILURE – THE MARKET 71% 7% 2% 20% CRT-D CRT-P CMEMS LVAD 2016 Market Revenue >$4B Market Growth*: Low to mid-single digits * excludes the impact from currency All dollar market sizes are based on estimated revenues 2016* Market Growth Expectations WW: 2%-4% U.S.: 3%-4% Intl: 2%-3% Market dynamics impacting the heart failure market in 2016:  Destination therapy continues to be primary growth driver WW for VADs  Establishing reimbursement for remote hemodynamic monitoring  Continued shift in global markets to CRT, increase in de novo mix, and premiums for new technologies  ~$300 million worldwide CRT-P market growing in the high-single digits
  28. 28. HEART FAILURE BURDEN1,2  26M HF sufferers globally3  15M Europeans  5.1M Americans suffer from HF  >650,000 new HF diagnoses each year  1 in 2 HF patients die in 5 years  Burden on the U.S. healthcare system is high  2.8M office and emergency department visits each year  1.0M HF hospitalizations each year  Leading cause of hospitalizations among patients >65 years old  Class III and IV HF patients represent ~75% of hospitalizations4,5  Every 30 seconds, someone is hospitalized for HF  U.S. in particular focused on new approach to reduce hospitalizations and improve outcomes Heart Failure is a growing and expensive public health issue of HF patients die in 5 years1 50% 5.1M 28
  29. 29. New York Heart Association (NYHA) Classification II III IV Intervention or Procedure Percent of Symptomatic HF Population 48% ~12.5M patients† 39% ~10.1M patients† 13% ~3.4M patients† Percent of HF Admissions 20% ~200,000 admissions‡ 44% ~440,000 admissions‡ 32% ~320,000 admissions‡ Cardiac Resynchronization Therapy (CRT) CardioMEMS™ HF System LVAD: Short and Long Term HEART FAILURE THERAPY CHARACTERIZED BY THREE PRIMARY DEVICE INTERVENTIONS1,2,3 †Based off 26M patients WW3 ‡Based on 1M U.S. admissions 29
  31. 31. STJ QUADRIPOLAR INNOVATION SET THE NEW STANDARD OF CARE: SUBSTANTIATED BY 100K+ IMPLANTS & 130+ PUBLICATIONS Finding Citation  97% implant success rate6  40.8% risk reduction in LV lead related events7  19% improvement in responder rates at 12 months7  44% relative reduction in non-responders7  $2,197 patient cost savings at 180-days post implant8  18% reduction in mortality9 2014 2014 2014 2014 31
  32. 32.  Problem Statement  Non-responders remain a significant issue even with advances in CRT technology  Cannot identify non-responders at implant  Solution: MPP provides an additional set of non- invasive tools -- pacing from two locations on a single lead to optimize and tailor CRT therapy  Tailor effective therapy  Improve outcomes for complex HF patients  Salvage non-responders or create super-responders  New Advanced Quadripolar Pacing Options**  Supplemental lead shapes for optimal placement*  Auto VectSelect Quartet™ Multivector Testing MULTIPOINT™ PACING (MPP)* THE NEXT GENERATION IN QUADRIPOLAR TECHNOLOGY * Caution - INVESTIGATIONAL DEVICE, LIMITED BY FEDERAL (OR UNITED STATES) LAW TO INVESTIGATIONAL USE ** WW launch beginning in 1H 2016 32
  33. 33. -4% -2% 0% 2% Q4'12 Q1'13 Q2'13 Q3'13 Q4'13  Growing body of evidence and real- world experience continue to build  60 abstracts/publications to date  Experience in international markets an analog for U.S. opportunity  Driver for share capture  Continued mix shift (now > 50% of CRT with ASP premium in markets where available)  Available in both CRT-D and CRT-P  Expect U.S. launch 2H 2016  MORE-CRT MPP Study:  Investigating conversion of non- responders by MPP (~1,800 patients)  Expect to complete enrollment 1H 2016 MULTIPOINT PACING*: STJ INNOVATION FOLLOWING IN THE FOOTSTEPS OF QUADRIPOLAR TECHNOLOGY MDT quad approval STJ MPP approval Finding Citation  Improved acute hemodynamic response10-13  Increased Ejection Fraction14  Improved reverse remodeling15  19% improvement in responder rates at 12- months16  44% relative reduction in non-responders16  Improved NYHA class17  Converted non-responders to responders17 STJ CRT-D Unit Share Shift: EMEA 33 * Caution - INVESTIGATIONAL DEVICE, LIMITED BY FEDERAL (OR UNITED STATES) LAW TO INVESTIGATIONAL USE
  35. 35. CURRENT BEST PRACTICE PROVEN TO BE INEFFECTIVE ACROSS NEARLY 5,000 PATIENTS Trial N Parameter Monitored/ Clinician Interaction Impact on HF Hospitalization Citation TEN-HMS18 426 Signs/symptoms, daily weights, BP, nurse telephone support None TELE-HF19 1,653 Signs/symptoms, daily weights None TIM-HF20 710 Signs/symptoms, daily weights None INH21 715 Signs/symptoms, telemonitoring, nurse coordinated DM None BEAT-HF22 1,437 Pre-D/C HF education, regularly scheduled telephone nurse coaching & remote monitoring of weight, BP, HR, signs/symptoms None Total 4,941 2010 2011 2005 2015 2012 35
  36. 36. CARDIOMEMS IS DIFFERENT: IT ENABLES TREATING PATIENTS BEFORE THEY EXHIBIT SYMPTOMS Graph adapted from Adamson PB, et al. Curr Heart Fail Reports, 2009. Only CardioMEMS HF System enables proactive management of patients before visible symptoms, shown to reduce HF hospitalizations by 37%23 STJ proprietary solution PA Pressure 36
  37. 37. CARDIOMEMS HF SYSTEM EVIDENCE CONTINUES TO GROW 33 KEY PUBLICATIONS/ABSTRACTS AND COUNTING 37% Reduction in HF hospitalizations at average 15-month follow-up20 48% Reduction in HF hospitalizations when control group has access to PA pressure monitoring21 Durability of treatment group in absence of nurse communications21 31 50% Reduction in heart failure hospitalizations within HFpEF population at average 18- month follow-up22 Reduction in 30-day heart failure readmissions in Medicare population23 78% 53% Survivability improvement of HFrEF treatment group compared to guideline directed medical therapy (GDMT) and ICD/CRT therapy25 2010 2015 2015 2014 2014 2015 MONTHS 37
  38. 38.  Heart failure with reduced ejection fraction (HFrEF; EF<40%)  ~50% of total HF population (~13M WW)  Indicated for guideline determined medical therapy, ICD, and/or CRT therapies  Heart failure with preserved ejection fraction (HFpEF; EF>40%)  ~50% of total HF population (~13M WW)  Underlying root causes not well understood, no consensus GDMT  No solutions previously proven prior to CardioMEMS  HF hospitalization rates equal to or higher than HFrEF patients  CardioMEMS hemodynamic-guided HF therapy is the 1st strategy to improve outcomes in HFpEF  Estimated at NNT = 2 HFpEF: ADDRESSING A LARGE UNDERSERVED HF POPULATION 38
  39. 39.  Clinical outcomes have been as good or better than observed in CHAMPION*  Training approach and integration into HF clinics has been validated in real world  Learning to proactively manage to pressure versus reactively responding to symptoms or weight /blood pressure changes  New workflow  Manageable weekly review of trends  Replaces traditional non-reimbursable activities for clinicians such as regular and patient-initiated phone calls, unscheduled clinic and ER visits and addressing symptomatic patients  The reality of HF penalties29  Facilities with higher readmission rates now incur up to a 3% reduction in total Medicare payments  Less than 25% of hospitals subject to the Hospital Readmissions Reduction Program performed well enough on the CMS' 30-day readmission program to face no penalty CARDIOMEMS IN THE “REAL WORLD” 39*Interviews with doctors regarding specific results. Results may vary
  40. 40.  Reimbursement headwinds not atypical for new technologies  Favorable reimbursement at national level (NTAP and TAPTS)  Challenges at the local Medicare Access Carrier (MAC) level being addressed and supported by new longer term data and publications  Novitas  Draft Local Coverage Determination (LCD) pending review of open comments  Expect decision 1Q 2016  First Coast Service Options (FCSO)  Reconsideration application for previous negative LCD submitted December 2015 and was accepted January 2016  Expect decision 1Q 2016 IMPROVING REIMBURSEMENT TO ACHIEVE STANDARD OF CARE 40
  41. 41.  Pursuing CMS National Coverage Determination (NCD)  Initiated discussions with CMS in October 2015  Submitted NCD draft in December 2015  Submitted formal NCD application January 29, 2016  NCD applies nationally to all Medicare beneficiaries and supersedes any LCDs  Possible outcomes: Coverage, No coverage, Coverage with Evidence Development (CED)  CED provides coverage while additional data is collected to continue developing the evidence base  Common mechanism used by CMS to provide coverage for new technologies (e.g., TAVR, TMVR and LAA)  Expected Timeline/Process* CMS NATIONAL COVERAGE DETERMINATION NCD Submitted 1/29/16 JAN CMS Decision to Accept Request <FEB-MAR End of Public Comment Period (30 days) <OCT Proposed Decision Released (6 months from acceptance) End of Public Comment Period (30 days) <SEP Final Decision Released (within 60 days of end of comment period) <DEC<MAR-APR *Optional HTA or MEDCAC meeting adds ~3 months, but considered unlikely (not done for TAVR, TMVR or LAA) 2016 2017 41
  42. 42. NEAR-TERM EVOLUTION OF CARDIOMEMS PLATFORM: MERLIN.NETTM 9.0 Website myMerlinTM application EHR Integration  Patient receives medication updates via smartphone app  Designed for both iPhone and Android use  Bi-directional communication for patient acknowledgement or escalation  Further automates communication with patient  Further eliminates/reduces phone calls while documenting interventions  Technology-enabled prescription adjustments  Medication updates electronically pushed to patient’s smartphone  CardioMEMS notifications displayed in EHR system directly  Allows CardioMEMS discrete data to be selectively integrated into practice EHR  Enables single site login within EHR and to further streamline workflow and leverage practice system of record 42
  43. 43. Our goal is to be the innovation and solution leader in HF SUMMARY Cardiac Resynchronization Therapy (CRT) CardioMEMS HF System Left Ventricular Assist Devices (LVADs) Product, Patient and Customer Synergies for Managing Heart Failure  CardioMEMS + CRT in  CardioMEMS-guided CRT programming & CardioMEMS-guided LVAD  Contracting across HF care pathway 43
  44. 44. HEART FAILURE: MECHANICAL CIRCULATORY SUPPORT John O’Connell M.D., Medical Director, Mechanical Circulatory Support and V.P., Medical Affairs
  45. 45. 45 2,500 5,000 76%93% 69% 66% 2014 2015 (est)20132012 Notes: (1) In the U.S. excludes HVAD stocking units prior to 2015. (2) Excludes PVAD and market participants other than Thoratec and Heartware. (3) U.S.- Q4’14 excludes a 53rd week for THOR (4) OUS-Q4’14 excludes a 53rd week for THOR HEARTMATE 3TM OFFERS NEAR-TERM OPPORTUNITY FOR SHARE CAPTURE IN INTERNATIONAL MARKETS 5,000 2,500 0 2014 2015 (est)2012 2013 42%47%47% 40% HeartMate(HM) HTWR U.S. Market (Units) International Market (Units) HM 3 offers opportunity for share capture OUS HM exited 4Q 2015 with ~73% share
  46. 46. 46 GROWTH DRIVEN BY TREMENDOUS BENEFITS OF THERAPY 0% 25% 50% 75% 100% Baseline 6 Months Bridge to Transplantation at 6 Months 0% 25% 50% 75% 100% Baseline 2 Years Destination Therapy at 2 Years Improvement in NYHA Functional Class Over Time30 Could not complete 345 m average Only 16% could complete pre implant 94% could complete post implant Bridge-to-Transplantation Six-Minute Walk Test (6MWT)31,32 NYHA IV NYHA III NYHA II NYHA I Can’t Walk Can Walk
  47. 47. HEARTMATE IITM IMPROVED ADVERSE EVENT RATES Device Related Infection Bleeding Requiring Surgery Pump Replacement Isc Stroke Hem Stroke Hemolysis Thrombus Trial PAS 0.06 0.031 0.47 0.22 0.07 0.052 0.024 0.06 0.024 0.027 0.23 0.09 0.057 0.026 Events/pt-year Note: 3x scale difference for Device infection and Bleeding requiring surgery compared to others Jorde, Khushwaha, Tatooles, et al. JACC 2014 Destination Therapy Trial vs. Post Approval Study (PAS) 47
  48. 48. HEARTMATE II LEFT VENTRICULAR ASSIST SYSTEM IS THE MOST WIDELY USED AND EXTENSIVELY STUDIED LVAD  Strong body of evidence  > 22,000 patients implanted  > 1,300 patient clinical trial (BTT & DT)  Extensive post-market study experience with highly challenging patient populations  > 720 published, peer-reviewed articles  Reliability demonstrated by > 2,000 patients at 3+ years of support (longest >10 years)  Benefits continue to improve over time 68% 73% 74% Trial CAP Post Approval 68% 74% 85% Trial CAP Post Approval Bridge-to- Transplant33 Destination Therapy34 1-Year Survival Rates 48
  49. 49. HEARTMATE 3 WITH FULL MAGLEVTM TECHNOLOGY FURTHER STRENGTHENS COMPETITIVE POSITION  Design objectives  Reduced adverse events  Compact size for less invasive surgical approaches  Return of pulsatility into continuous flow profile  Full support (flow) up to 10L/minute at lower pump speeds  Large and consistent gaps allow for thorough washing and avoidance of blood trauma (shear) Caution - INVESTIGATIONAL DEVICE, LIMITED BY FEDERAL (OR UNITED STATES) LAW TO INVESTIGATIONAL USE. 49
  50. 50. 0.50 0.60 0.70 0.80 0.90 1.00 0 1 2 3 4 5 6 PercentSurvival Months Estimated SHFM HM3 actuarial survival 92% 78% Estimated hazard ratio for the HM3 = 0.34 P = 0.0093 HeartMate 3 reduced the 6-month mortality risk by 66% 6-MONTH HEARTMATE 3* RESULTS IN IMPROVED SURVIVAL VS. PREDICTED MEDICAL SURVIVAL USING SEATTLE HF MODEL *Caution - INVESTIGATIONAL DEVICE, LIMITED BY FEDERAL (OR UNITED STATES) LAW TO INVESTIGATIONAL USE. 50
  51. 51. HEARTMATE 3** HAS A FAVORABLE ADVERSE EVENT PROFILE Days 0 – 30 (n=50) Days 0 – 180 (n=50) Event # Pts % Pts # Events # Pts % Pts # Events Bleeding 15 30% 19 19 38% 35 Requiring Surgery 6 12% 6 7 14% 8 GI 2 4% 2 4 8% 6 Any Infection 10 20% 14 18 36% 28 Sepsis 4 8% 4 8 16% 8 Driveline 1 2% 1 5 10% 5 Stroke 2 4% 2 6 12% 6 Ischemic 2 4% 2 4 8% 4 Hemorrhagic 0 0% 0 2 4% 2 Neurologic Dysfunction* 2 4% 2 4 8% 4 Right Heart Failure 4 8% 4 5 10% 5 Requiring RVAD 2 4% 2 2 4% 2 Pump Malfunction 0 0% 0 0 0% 0 Pump Thrombosis 0 0% 0 0 0% 0 Hemolysis 0 0% 0 0 0% 0 *TIA, seizures **Caution - INVESTIGATIONAL DEVICE, LIMITED BY FEDERAL (OR UNITED STATES) LAW TO INVESTIGATIONAL USE. 51
  52. 52.  European limited market release 4Q 2015, full market release by the end of 1Q 2016  CE Mark approved mid-October 2015  30+ centers actively implanting by the end of 2015 (including major German centers)  200+ devices implanted through end of 2015  MOMENTUM 3 U.S. IDE Study (currently enrolling)  Over 1,000 patients at up to 60 U.S. sites (548 enrolled as of January 2016)  Single study design for short and long term use  First 294 patients with six month follow up (enrollment completed in October 2015)  Short-term indication FDA submission expected 2H 2016  First 366 patients with two year follow up (enrollment completed in November 2015)  Approximately 600 additional patients to evaluate Secondary Endpoints  Non-inferiority study randomized 1:1 against HeartMate IITM  Primary Endpoints: Survival on HeartMate 3 support free of stroke or pump replacement HEARTMATE 3* PROGRAM IS ON-TRACK *Caution - INVESTIGATIONAL DEVICE, LIMITED BY FEDERAL (OR UNITED STATES) LAW TO INVESTIGATIONAL USE. 52
  53. 53.  St. Jude Medical offers the broadest portfolio of mechanical circulatory support devices to treat the full range of clinical needs for patients suffering from advanced HF  HeartMate II is the most widely used and extensively studied LVAD on the market  HeartMate 3 is a next generation LVAD with the first fully magnetically levitated compact VAD  MOMENTUM 3 IDE study continues to enroll  First quarter of the European launch was a success  Will complete the full rollout by the end of 1Q 2016  Short-term indication FDA submission 2H 2016 SUMMARY 53
  54. 54. 54 Q&A Panel Moderator: Mike Rousseau, President and CEO Panelists: Phil Adamson, M.D., Medical Director and V.P., Medical Affairs Eric Fain, M.D., Group President John O’Connell, M.D., Medical Director, Mechanical Circulatory Support and V.P., Medical Affairs Don Zurbay, Chief Financial Officer
  55. 55. 55 St. Jude Medical Important Dates in 2016:  First quarter 2016 earnings results conference call: April 20, 2016  Second quarter 2016 earnings results conference call: July 20, 2016  Third quarter 2016 earnings results conference call: October 19, 2016 MID-MORNING BREAK
  57. 57. 31% 16% 14% 16% 11% 8% 4% EP Ablation EP Diagnostic EP Mapping and Recording Systems Cardiac Monitors Access ICE/Other LAA Closure ATRIAL FIBRILLATION (AF) – THE MARKET 2016 Market Revenue >$4B Market Growth*: Low double digits *excludes the impact from currency All dollar market sizes are based on estimated revenues 2016* Market Growth Expectations WW: 11%-12% U.S.: 12%-14% Intl: 9%-10% Market dynamics impacting the AF market in 2016:  ~2.5% of the diagnosed symptomatic AF patient population receiving ablation  Strong growth in ablation driven by catheter ablation and advanced technology adoption  WW ablation procedures projected to reach almost 950K in 2016 (double digit growth)  Force-sensing catheters quickly becoming standard of care  Continued steady catheter ablation growth expected for U.S. patients diagnosed with AF 57
  58. 58. ELECTROPHYSIOLOGY (EP) ABLATION MARKET IS ~75% IRRIGATED/ADVANCED ABLATION Revenue in Millions U.S. Catheter Ablation  Procedures estimated to be ~270K in 2016 (8% growth)  In two years over 50% of the U.S. irrigated ablation catheter market moved to contact force  Market revenue growing at 17% (’13-’16 CAGR)  STJ expects to gain multiple share points in 2016 WW Catheter Ablation  Procedures estimated to be ~950K in 2016 (10% growth)  Market revenue growing at 11% (’13-’16 CAGR)  STJ expects to gain multiple share points in 2016 $0 $1,400 US WW Estimated 2016 Catheter Ablation Market Size1 Standard Irrigated/Advanced 58
  59. 59. INTEGRATED EP PRODUCT PORTFOLIO WorkMate™ ClarisTM Recording System (1.1/1.1.1 software) ***MediGuideTM Technology 17.0 software, **CRT 2.0 tools, Quadra Excel™ Guidewire, Sensor Enabled™ VantageViewTM System HD display with add-on tools ***EnSite PrecisionTM Cardiac Mapping System TactiCathTM Quartz Contact Force Ablation Catheter **TactiCath™ Contact Force Ablation Catheter, Sensor Enabled™ FlexAbilityTM Ablation Catheter *FlexAbility™ Ablation Catheter, Sensor Enabled™ AmpereTM RF Ablation Generator Cool PointTM Irrigation Pump AgilisTM NxT Steerable Introducers SwartzTM Braided Transseptal Guiding Introducers BRKTM Transseptal Needles Access and Guidance Advanced Ablation Recording Mapping and Navigation Diagnostics and Visualization ViewFlexTM and ViewMateTM Intracardiac Ultrasound Reflexion™ Spiral Variable Radius Mapping Catheters LiveWireTM and InquiryTM Steerable Catheters ResponseTM and SupremeTM EP Catheters **Advisor™ FL Circular Mapping Catheter, Sensor Enabled™ **Next Generation Confirm ™ STJ Integrated Lab Complete Ablation Solution *PMA under review **Product not available for sale; remains in development ***510K pending 59
  61. 61. LOWER AF RECURRENCE AND SHORTER PROCEDURE TIMES USING CONTACT FORCE1,4 LOWER AF RECURRENCE rate and SHORTER PROCEDURE TIMES in contact force compared to conventional catheters was shown in meta-analysis of 8 independent studies involving 530 patients1 156 173 145 150 155 160 165 170 175 Procedure Times (min) Contact Force Conventional 35% 46% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% AF Recurrence Rate P=0.009 P=0.004 Using CF catheters was an INDEPENDENT PREDICTOR OF PROCEDURAL SUCCESS evaluating all patients undergoing RF ablation for paroxysmal or persistent AF (n=721)4 Multivariate Predictors of AF Recurrence HR 95% CI Persistent AF 2.05 1.48-2.83 LA Volume >40ml/m2 1.42 1.04-1.93 CF Use 0.58 0.42-0.79 BMI 1.04 1.01-1.08 AF Duration (years) 1.07 1.04-1.09 61
  62. 62.  STJ is the only company to have defined optimal contact force parameters through a robust, compelling set of clinical studies  Using optimal contact force parameters with TactiCath catheter decreases rate of repeat ablation5  Using optimal contact force parameters with TactiCath catheter decreases patient cost of care one year after ablation4 DEFINITION OF OPTIMAL CONTACT FORCE PARAMETERS KEY TO IMPROVED OUTCOMES, LOWER COST Optimal Contact Force Rate of Repeat Ablation5 Total Cost per Patient in Year After Ablation6 62
  63. 63. TECHNOLOGY ADVANTAGES SUGGEST STJ SHARE CAPTURE OPPORTUNITY  STJ’s proprietary sensor technology advantages:  Fiber optic sensing allows force to be measured closer to tip where power applied, allow uninhibited use of long introducer sheath  50Hz sampling rate allows for visualization of transient peaks with cardiac movement and increased real-time feedback  No calibration required, which may save time and shorten procedures * Data from the TactiCath catheter are applicable to the TactiCath Quartz catheter as the design modifications made to the TactiCath catheter were fully verifiable in bench testing. The concept and working principle of the optical force sensor did not change TactiCath™ catheterSmartTouch catheter  SmartTouch SF Lateral Contact Force measurements showed error up to 41.7 g in lateral orientation7  A separate study characterized the contact force accuracy of the TactiCath™ catheter. Results of this study showed mean error was ≤ 1 g*8 63
  64. 64. STJ ABLATION BUSINESS FUELED BY TACTICATH™ QUARTZ  >7% unit share gain in irrigated advanced ablation in the U.S. since the launch of TactiCath Quartz9  Momentum continues to build with >350 TactiCath™ Quartz catheter accounts in the U.S.10  TactiCath represents over 50% of STJ’s U.S. irrigated portfolio11  Expect approval of TactiCath in Japan 2H 2016 64
  65. 65. FLEXABILITY™ ABLATION CATHETER RECEIVES PRAISE FOR HANDLING, TIP PERFORMANCE  STJ irrigated portfolio growth outpaced estimated market growth in Japan by >10 percentage points in 201512  FlexAbility rapidly grew to represent 58% of STJ’s Japan irrigated portfolio within the first year of launch13  Validated STJ’s next generation handle-shaft combination as the right platform of the future  Next generation shaft: reliability, accuracy and consistent performance  Advanced handle-shaft combination: Maneuverability with comfort and ease of use  Distinct advantages of unique flexible tip  In recent preclinical work14, the FlexAbility™ ablation catheter showed comparable lesion sizes to competitive catheters and had:  Significantly lower rate of steam pop when compared to ThermoCool™ SF  Less instances of char when compared to ThermoCool™ 65
  66. 66. 66 STJ ABLATION SHARE CAPTURE IN 2015 JUST THE BEGINNING  Gained over 4 points of U.S. ablation catheter share  Increased STJ ablation catheter penetration with current NavX users globally  Anticipate continued FlexAbility, TactiCath adoption in approved geographies  Expect approval of TactiCath in Japan 2H 2016 FlexAbility ablation catheter TactiCath Quartz ablation catheter Ampere RF generator
  68. 68. EnSite Precision Module, Sensor EnabledTM* FlexAbility Ablation Catheter, Sensor Enabled*** AdvisorTM FL Circular Mapping Catheter, Sensor EnabledTM** EnSite Precision Surface Electrode Kit* EnSite AutoMap* AutoMark* EnSite Precision Software v2.0* A comprehensive launch of tools and software throughout 2016 ENSITE™ PRECISION CARDIAC MAPPING SYSTEM *510K pending. **Product not available for sale; remains in development ***PMA pending review Excludes China 68
  69. 69. EnSite Precision* CARTO Rhythmia Automated HD Mapping + TurboMap feature Flexible Workflow Clinically validated Contact Force parameters Integrated Lab Automated Lesion Marking Proven Platform (Used in 100,000’s of procedures) Fully Integrates Contact Force Leverage Impedance AND Magnetics coordinate systems HOW DOES PRECISION STACK UP AGAINST THE CURRENT GENERATION SYSTEMS *510K pending. 69
  70. 70.  Designed for improved system and software ease of use  Anticipate improved data acquisition and speed of acquisition in everyday use, for all procedure types  Faster decision-making with both positive and negative morphology matching score15, 16  Faster, more accurate map creation with greater consistency across cases15, 16  Secondary arrhythmias mapped up to 10x faster with TurboMap feature  Enhanced VT mapping with automated morphology matching capability15,16 and automatic catheter ectopy rejection NEW SOFTWARE PLATFORM* IS A GAME CHANGER EnSite™ AutoMap Module, TurboMap Feature *510K pending 70
  71. 71.  Only system to optimally integrate magnetic and impedance data  3-D models with CT-scan-like detail – 27x†† higher point density  Automated lesion marking guidance with the AutoMark module17  Easily visualize scar tissue – integration of delayed enhancement MRI imaging17,18  SparkleMap feature enables easy visualization of voltage pathways on a single map  Customizable dashboard Tailor patient therapy and streamline workflow SYSTEM OPTIMIZED FOR TAILORED PATIENT THERAPY* †† Based on minimum distance allowed between 3-D model points with Precision system versus previous EnSiteTM VelocityTM system. AutoMark Module SparkleMap Feature *510K pending 71
  72. 72. INITIAL FEEDBACK VERY POSITIVE  Initial cases have been performed as part of a limited market release at 3 centers in Germany starting January 26  The EnSite Precision Cardiac Mapping system* was used in a variety of procedures including atypical flutter, paroxysmal and persistent AF, and VT  System performance has been excellent through challenging procedure dynamics such as: multiple patient defibrillations, fluid loading, lengthy procedures times, and complex arrhythmia diagnosis and treatment  Limited market release is expected to continue in Italy and France in coming weeks, followed by a full market release in 2Q 2016  Anticipate 510k clearance 1H 2016 “Improvements to model precision, model stability, and mapping automaticity were significant and have delivered the next generation of mapping technology to Leipzig.” - Prof. Gerhard Hindricks EHRA President EP Director, Heart Center, University of Leipzig “Improvements to model precision and model stability were significant. EnSite Precision addressed the concerns that caused me to stop using EnSite Velocity about two years ago.” - Dr Christopher Piorkowski EP Director, Heart Center, University of Dresden “This system is exactly what I hoped it would be. AutoMap is great. Very fast. Feels like the mapping data is more reliable” - Prof. Isabel Deisenhofer Head Senior Physician, German Heart Center, Munich Germany *510K pending 72
  74. 74.  We are a veteran in this space with a significant implant base and over 5 years of experience  STJ is the market leader in Europe  Ease of use  Broad size matrix  Complete seal of left atrial appendage  We plan to initiate global IDE Study in 2H 2016  Encouraging, on-going discussions with the FDA and CMS  Randomized clinical trial vs. approved BSX devices LAA closure is an attractive, emerging opportunity. IDE study expected to begin in 2016 LEFT ATRIAL APPENDAGE (LAA) OCCLUSION $- $30 2011 2012 2013 2014 2015 STJ International LAA Revenue Dollars in millions *Constant Currency Compounded Annual Growth Rate Product not available for sale in the U.S.; remains in development 74
  76. 76. Insertable Cardiac Monitor for Long-Term Arrhythmia Diagnosis  Drive share gains in >$600M market with low double digit growth  Small device size (<1.5cc)  Simple insertion procedure requiring minimal time and resources. Intuitive one-touch programming  Automatic wireless connectivity to  Simplified reports to facilitate monitoring and diagnosis  Expect CE Mark 2H 2016 and FDA clearance 1H 2017 NEXT GENERATION CONFIRM™ Incision and Insertion Tools Next Generation Confirm Patient App (myMerlin) for iOS & Android Remote Care ( Product not available for sale; remains in development. 76
  77. 77.  Only company to offer full Integrated Lab – improving service offerings  Comprehensive training and on-site support  Contract/payment options with full purchase, complement of hardware and disposables Offering our customers the broadest portfolio of solutions END TO END EP/AF SOLUTION FROM STJ PROVIDES HOSPITALS, PURCHASING TEAMS AND CONSUMERS AN ADVANTAGE Lab Features: EnSite Precision™ cardiac mapping system; VantageView™ HD monitoring system; ViewMate™ ultrasound console; MediGuide™ technology; WorkMate Claris™ recording system 77
  78. 78.  AF is one of the best growth stories in MedTech  WW market is expected to be over $4 billion and growing low double digits  STJ continues to have the deepest, broadest and most technologically advanced AF portfolio in the industry  Demonstrated catheter technology leadership in 2015 with FlexAbility and TactiCath and expect to continue to take additional ablation catheter share in 2016  STJ continues to see LAA occlusion as an attractive market and expects to begin an IDE study in 2016  Enter the insertable cardiac monitor market and the launch of the EnSite Precision Cardiac Mapping System offer significant growth opportunities in 2016 and beyond Market leading technology and most comprehensive EP portfolio SUMMARY 78
  79. 79. TRADITIONAL CRM: A PATH TO RECOVERY IN THE U.S. Eric Fain, M.D., Group President
  80. 80. WW TRADITIONAL CRM MARKET DYNAMICS Market Dynamics  Low, single-digit unit growth offset by pricing pressure  U.S. ASP pressure partially offset by shift to CRT, increased de novo mix, and premium for new technologies  OUS implants steady and positive  Japan bi-annual reimbursement cuts in 2016 49%51% Pacemakers (single & dual chamber) ICDs (single & dual chamber) 2016* Market Growth WW: flat U.S.: -3% to -1% Intl: 0% to 2% 2016 Market Revenue >$6.6B Market Growth*: Flat 80 * excludes the impact from currency All dollar market sizes are based on estimated revenues
  81. 81. 81 A PATH TO CRM SHARE RECAPTURE  Multiple new product launches in 2016 and 2017 that return our CRM business to technology leadership  Expect to have new MRI labeled device submissions and launches across CRM product segments in key markets globally  Once approved in the U.S., MultiPoint™ CRT Pacing and Nanostim™ leadless pacemaker expected to provide competitive advantage in U.S. contracting  Continued growth and leadership in heart failure and AF improve the economics, investment, and competitiveness of our CRM business  We are uniquely positioned to partner with hospitals by contracting across the cardiovascular service line
  82. 82. 82 RETURN TO GLOBAL TECHNOLOGY LEADERSHIP IN CRM The St. Jude Medical CRM portfolio demonstrates our leadership with innovative technology solutions 1 Launched in EU as part of post market clinical trial 2 IDE study completion in 2016 in United States Smallest, longest lasting wireless MRI Pacemaker New standard in CRT pacing Leadership in leadless technology High Voltage MRI portfolio Arrhythmia diagnosis Assurity MRI™ Pacemaker* Nanostim™ Leadless Pacemaker* MultiPoint™ Pacing* MRI labeling for existing Ellipse™ & Fortify Assura™ ICDs, and Quadra Assura™ CRT-D devices* EU: Launched U.S.: 1H’16 JPN: Launched EU: Launched U.S.: 2H’16 EU: Launched1 U.S.: 2H’16 EU: Launched U.S.: 1H’172 JPN: Launching (ICD) 2H’16 (CRT-D) Next Generation Confirm™ Insertable Cardiac Monitor* EU: 2H’16 U.S.: 1H’17 *Caution - INVESTIGATIONAL DEVICE, LIMITED BY FEDERAL (OR UNITED STATES) LAW TO INVESTIGATIONAL USE.
  83. 83. 83  1H 2016 U.S. launch of Assurity MRI™ pacer  World’s smallest, longest lasting wireless, remotely managed, MRI pacemaker  Efficient workflow using the STJ MRI activator  1H 2016 Japan launch of MRI labelled ICD  Backwards compatible to existing device and lead technology  Expect to see similar share recapture as LV MRI launch  2H 2016 Japan launch of MRI labelled CRT-D 2016 MRI LAUNCHES WILL PROVIDE CATALYST FOR GROWTH 1H'12 2H'12 1H'13 2H'13 1H'14 2H'14 PacemakerMarketShare Impact of MRI Pacemaker Labeling on STJ Share in Japan Competitive MRI PM launch STJ MRI PM launch  U.S. IDE clinical trial to support MRI labeling for existing HV devices  Enroll patients previously implanted with STJ HV devices  Endpoint based on 30-day follow-up of ~150 patients  Expect IDE completion in 2H 2016, launch in 1H 2017
  84. 84. 84 Clinical Summary  Over 1,000 Nanostim™ implants worldwide  Leadless II Study results presented at ESC’15 and in NEJM  Building back momentum in Europe with post-market registry  FDA Panel meeting scheduled for February 18, 2016  Expect U.S. launch 2H 2016 Product Characteristics  Smallest introducer size  Demonstrated chronic retrievability  Expect greater longevity than traditional VVI pacers  MRI labeling  Peri-operative complication rates similar to traditional VVI pacers with absence of long-term adverse events observed Dual chamber leadless pacing system development continues to make progress NANOSTIMTM LEADLESS PACEMAKER* *Caution - INVESTIGATIONAL DEVICE, LIMITED BY FEDERAL (OR UNITED STATES) LAW TO INVESTIGATIONAL USE.
  85. 85. 85 SUMMARY  In 2016 our product cycle is a path to return STJ to technology leadership in CRM and provide a foundation for sustained growth  Growth and share recapture in our CRM business will be driven by key product introductions in 2016 including:  Assurity MRI (U.S.)  HV MRI (Japan and U.S. IDE)  MultiPoint Pacing (U.S.)  Nanostim (U.S.)  Next Generation Confirm™ Insertable Cardiac Monitor (OUS)  As momentum continues to grow in our AF and HF franchises, we expect to see increasing benefit to our traditional CRM franchise as we partner and align with our customers to address their greatest unmet needs
  86. 86. NEUROMODULATION: BUILDING THE MOST COMPREHENSIVE PORTFOLIO Keith Boettiger, Sr. V.P. & General Manager, Chronic Pain & Movement Disorder Therapies
  87. 87. NEUROMODULATION MARKET OVERVIEW Key Market Dynamics  Market remains underpenetrated  Oral opioid use under scrutiny (especially U.S.) creating favorable market conditions for effective, non-drug therapies  Replacement cycle driving new units (expect double digit growth of replacements in U.S.)  Stable ASPs despite new competition, driven by premium price capture for new technologies  Competition from new entrants driving market growth as awareness is raised 87 2016 Market Revenue >$2.4B Market Growth*: Mid to high-single digits 67%8% 2% 23% Traditional Spinal Cord Stimulation (SCS) Radio Frequency Ablation (RFA) Dorsal Root Ganglion (DRG) Deep Brain Stimulation (DBS) 2016* Market Growth Expectations WW: 7%-9% U.S.: 6%-8% Intl: 8%-10% * excludes the impact from currency All dollar market sizes are based on estimated revenues
  89. 89. PATIENTS ENDURE LONG, COMPLICATED PATH Surgeon (General Orthopedic)Referral Diag- nosis Treat- ment Internal Medicine/GP Non-Interventional Pain Management Interventional Pain Management Non- Opioids History Physical Exam Spine Surgeon Surgeon Exercise Psychologi- cal Therapy Physical Therapy NSAIDS OTC Meds History History Non- Opioids Injections Surgery Exercise Physical Therapy TENS NSAIDS OTC Meds NSAIDS TENS Long Acting Opioids Opioids OTC Meds Physical Therapy Exercise Non- Opioids Non- Opioids SCS Trial Pump EMG (PM&R) NSAIDS Physical Therapy RFA Injections Non- Opioids Injections SCS Implant Exercise 2nd surgery Physical Therapy NSAIDS OTC Meds Non- Opioids Exercise Physical Therapy NSAIDS OTC Meds 3 – 5 Steps 6 mo. – 4 yrs. 2 – 8 Steps 6 mos.– 1 yr. 2 – 8 Steps 6 mos.– 2 yrs. 3 – 8 Steps 2 – 5 yrs 3 – 8 Steps 2– 6 yrs. 3 – 8 Steps 6 mos.– 4 yrs.  Path to treat pain is long and fragmented  Patients often desperate to resolve or reduce pain  Patients typically end at long-term opioid therapy at risk of addiction  Clinical and economic data demonstrate benefits of SCS earlier in the care continuum 89
  90. 90. SPINAL CORD STIMULATION  Burst gaining momentum where approved*  SUNBURST RCT preliminary results demonstrate superiority vs. tonic  Invisible trial system: discreet, convenient and Burst-enabled trial experience**  iPod Touch and iPad Mini leverage familiar iOS for consumer friendly peripherals RADIOFREQUENCY ABLATION (RFA)  ~$200M global market  ~90% SCS implanters also use RFA  Full line of RFA products including generators, electrodes and cannulae  Marketed in ~70 countries  DRG becoming standard of care for Complex Regional Pain Syndrome (CRPS) and peripheral nerve injury internationally  ACCURATE trial demonstrates superiority vs. conventional SCS  Estimated CRPS prevalence is 20% of global market (DRG therapy uniquely positioned to treat)  Groundswell of clinician excitement for new technology to treat a poorly treated patient group  DRG Launch: FDA approval expected 1H 2016 DRG* 90 STJ IS UNIQUELY POSITIONED TO SURROUND THE PAIN PATIENT *Caution - INVESTIGATIONAL DEVICE, LIMITED BY FEDERAL (OR UNITED STATES) LAW TO INVESTIGATIONAL USE. **In selected geographies where approved
  92. 92. In addition to SUNBURST randomized clinical trial, clinical evidence continues to grow:  German observational study shows STJ Burst equal to or better than HF-10 in head-to-head comparison in 16 FBSS patients (>70% back pain with or without leg pain) randomized and blinded demonstrated 3 key findings1: 1. 100% trial conversion to Burst and 75% trial conversion to HF 10 (2 failures) 2. Both Burst and HF-10 achieved reduction in VAS for back pain that were not significantly different 3. Burst achieved significantly lower VAS for leg pain (p< 0.009)  Expect Burst U.S. approval and launch 2H 2016 WE ARE POISED TO TAKE SHARE WITH PROVEN STJ BURST 92  Limited (~10%) market penetration with advanced waveforms through 2015  STJ and one competitor with advanced waveforms represent significant market share opportunity  Recent success in Australia demonstrates our competitive position:  Australia market share leader*  Q1 2015 Pre-BURST: ~24%  Q4 2015 Post-BURST: ~31% 2014 2015 2016 New Waveforms (SCS) Adv Waveform Penetration Adv Waveform Opportunity 4% 96% 91% 9% 85% 15% *Based off of revenue, PWC Consortium data Q1 and Q4 2015
  93. 93. 93 Significantly improved pain outcomes  More than 90% of patients preferred Burst over tonic SCS with better pain relief cited as the primary reason3-6  Almost 95% of tonic responders experienced a greater reduction in NRS score during Burst stimulation7  Provided pain relief superior to tonic for overall, trunk, and limb pain6 Demonstrated ability to rescue prior failures  62.5% of non-responders responded to Burst8 Preferred by patients while preserving patient choice  69% of patients preferred Burst (p<0.001)9  21% of patients still preferred Tonic stimulation and only STJ can provide both options in a single solution9 Improved workflow  Burst required 50% fewer office visits and lasted 10% as long as regular visits10 GROWING EVIDENCE FOR BURST THERAPY Caution - INVESTIGATIONAL DEVICE, LIMITED BY FEDERAL (OR UNITED STATES) LAW TO INVESTIGATIONAL USE
  94. 94. Recharge-Free PlatformInvisible Trial MRI TREATING THE PAIN PATIENT; CREATING PATIENT PREFERENCE  Invisible therapy leading to patient normalcy  Recharge-free; no patient burden  First Bluetooth™ enabled system  First Apple™ iPod touch™ and iPad mini™ programming system  Upgradeable technology platform  First Bluetooth™- enabled system  First “on body” trial system  First Burst & Tonic Capable EPG  Current state: Head and extremity MRI  Future state: Full-Body Conditional MRI  Expect U.S. launch of full- body MRI in 2H 2016 Improve the patient experience with the Proclaim platform to create preference and expand patient appetite for SCS trials through improved patient comfort and convenience 94
  95. 95. STJ DELIVERING MORE FREEDOM *Estimates based up daily recharging recommended in Nevro Patient Manual 11052 Rev A (2015-01-16) Traditional Platforms Step 1 – Identify IPG location suitable for recharging Step 2 – Place IPG superficially to facilitate charging Step 3 – Educate patient on charging Step 4 – Daily or weekly charging for 1-4 hours (frequency dependent) Proclaim™ Recharge Free  Can be implanted almost ~2x deeper than rechargeable options  Designed to reduce patient burden and discomfort  Saves patient 1,825 hours, or 76 full days of recharging, over IPG options with recommendations of daily charging in 5 years of use*  Gives patients an opportunity to focus on normal daily activities 95
  97. 97. Total Knee Replacement 192 122 92 84 37 2923 15 -10% 0% 10% 20% 30% 40% 50% 60% -200 0 200 400 600 800 1,000 Chronicpain% Procedures ('000s) U.S. DRG Market Opportunities ($M)  DRG therapy is designed for focal pain conditions often characterized by nerve injury  Nerve injury is common in the large (and growing) postsurgical pain markets such as hernia, hip and knee postsurgical pain syndromes  Several physician-initiated studies internationally hold promise to expand indications beyond current labeling  Etiologies are prevalent but poorly treated with current technologies providing a unique opportunity for DRG therapy Hernia Surgery Amputations (lower extremity) Cardiac Surgery Mastectomy Caesarean Section Total Hip Replacement Thoracotomy 97 DRG STIMULATION EXPANDS THE MARKET Notes where DRG is well-positioned
  98. 98. 98  DRG procedure similar to traditional SCS  >400K post-surgical intractable chronic pain patients (U.S. only)11-14  Uses low energy (<10% traditional) with minimal postural effects15  Compared to traditional SCS for patients with chronic lower limb pain due to CRPS and peripheral causalgia, DRG stimulation provides15:  Sustained and superior pain relief  After 12 months, significantly more DRG stimulation patients achieved pain relief and treatment success versus control SCS (74.2% vs. 53.0%)  Improved therapeutic targeting  DRG stimulation patients reported better stimulation targeting in their area of pain without extraneous paresthesia (94.5% vs. 61.2%)  Improved quality of life (QoL) and reduced paresthesia  DRG patients experienced improved QoL measures, psychological disposition and activity levels  After 12 months, more than a third of DRG stimulation patients were experiencing greater than 80% pain relief with no paresthesia ACCURATE VALIDATES DRG AS SUPERIOR TO SCS Caution - INVESTIGATIONAL DEVICE, LIMITED BY FEDERAL (OR UNITED STATES) LAW TO INVESTIGATIONAL USE
  99. 99. 99  Highly motivated and well-trained sales force  Excellent technical and clinical skills  Demonstrated ability to execute during technology reboot  Proven ability to build partnerships with interventional pain physicians and sell product portfolio  Long-standing respect among physician community FIELD SELLING ORGANIZATION PREPARED AND EAGER TO EXECUTE
  100. 100. DBS OPPORTUNITY 100
  101. 101. 101 DEEP BRAIN STIMULATION (DBS) MARKET OPPORTUNITY 6.3M Worldwide PREVALENCE (no differentiation for race or culture) DBS Penetration <1% of the addressable population have been treated with DBS <1% $25B ECONOMIC IMPACT $25B is the estimated annual direct and indirect cost of care for patients with Parkinson’s disease in the United States alone SMALL NUMBER OF IMPLANTERS ~150 is the number of surgeons WW who perform over 50 new cases per year, ~70% academic 150  2016: ~$600M worldwide market with high-single digit to low double-digit growth of underpenetrated, monopoly market  Stable reimbursement  70% of cases done in less than 100 centers (U.S.)  50% of the market is IPG replacements
  102. 102. WINNING WITH INNOVATION IN DBS Patient PeripheralsInfinity Platform Directional Lead  User-friendly Apple™ mobile digital devices  First Apple™ iPod touch™ programming system  Programming ease-of- use for physician  App-based Bluetooth® wireless communication  Competitive headers  First Apple™ iPad mini™ programming system  Upgradeable technology platform  Steer therapy to avoid stimulating undesirable areas such as those that produce side-effects  Reduce current for battery longevity  Compatible extensible extension Platform engineered to fuel patient independence DBS Global Launch expected 2H 2016 102
  103. 103. 103  STJ neuromodulation business transformed and positioned to be global technology leader  World-class field selling organization prepared and eager to execute  Only company with a portfolio that surrounds the interventional pain physician and treats chronic pain patients throughout the continuum of care  Radio frequency ablation  Proprietary SCS Burst waveform with upgradeable capability  Dorsal Root Ganglion (DRG) therapy for targeted pain syndromes  Advanced waveforms show superior results to traditional therapy and only account for ~10% of the market  The ACCURATE study showed that DRG was superior in treating targeted pain syndromes versus tonic  Entering a DBS market that has been starved for innovation for the past 15 years  Directional lead technology as the future standard of care  Devices engineered for patient independence: Apple™ consumer devices and simplified programming SUMMARY
  104. 104. CARDIOVASCULAR: PRODUCTS TO WATCH IN 2016 Phil Ebeling , V.P. and Chief Technology Officer
  105. 105. CARDIOVASCULAR – THE MARKET Market Dynamics  Strong double digit TAVR market growth driven by expansion into lower risk patients  Tissue valves remain the gold standard for most patients with aortic stenosis  WW market expected to continue to grow low- single digits  Strong double digit growth in percutaneous heart pumps  U.S. reimbursement established  PCI optimization market expected to grow low double digits  Upcoming OCT reimbursement for U.S. physicians 34% 24%4% 13% 9% 6% 4% 6% TAVR Surgical Valves PFO/CHD PCI Optimization Closure Other PHP Embolization 2016 Market Revenue >$6B Market Growth*: High-single to low double digits * excludes the impact from currency All dollar market sizes are based on estimated revenues 2016* Market Growth Expectations WW: 9%-11% U.S.: 12%-13% Intl: 6%-8% 105
  106. 106. Significant market opportunity  Strong double digit market growth driven by expansion into lower risk patients Consistent, positive physician feedback  Ease of use: prep, delivery, deploy and recapture, profile  Low rate of permanent pacemakers IDE enrollment ongoing  Strong group of enthusiastic enrolling centers  Competitive trial recently completed enrollment Exceeded Q4 2015 expectations  Key contracts awarded in Germany, Switzerland, Italy, Nordics  First full quarter offering full portfolio of valve sizes Full launch of a comprehensive PorticoTM transcatheter aortic valve size offering in international markets, and a fully enrolling U.S. IDE provides meaningful growth in 2016 STJ IS AN EMERGING LEADER IN THE TRANSCATHETER AORTIC VALVE MARKET $0 $2 $4 2015 2016 2017 2018 2019 2020Revenue(billions) TAVR WW Market (‘15-’20 CAGR: ~18%) 106*Caution - INVESTIGATIONAL DEVICE, LIMITED BY FEDERAL (OR UNITED STATES) LAW TO INVESTIGATIONAL USE
  107. 107. A self-expanding, repositionable and retrievable transcatheter aortic valve** PORTICO IDE TRIAL UPDATE* Trial Design: A prospective, multi-center, randomized-controlled study of TAVR in patients at high or extreme risk for surgical AVR. 1,206 randomized subjects at 60 U.S. centers. Portico Devices Studied: 23, 25, 27, 29 mm valves with transfemoral and transaortic/subclavian delivery systems Control: Commercially available TAVR Primary Endpoints: Safety composite (mortality, stroke, bleed, AKI, Vasc Comp) at 30 days Effectiveness composite (mortality, stroke, > moderate AI) at 1 year Follow-up: 30 days, 6 months, 1, 2, 3, 4 and 5 years ** Repositionable and retrievable until fully deployed *Caution - INVESTIGATIONAL DEVICE, LIMITED BY FEDERAL (OR UNITED STATES) LAW TO INVESTIGATIONAL USE. 107
  108. 108. Scope:  Features to improve placement accuracy, ease of use, profile and trackability  Further improve paravalvular leak (PVL) performance  Expanded valve size offering (18mm – 30mm annulus size)  Transfemoral/subclavian/transaortic approaches Product Overview:  Improved positioning accuracy with a stability layer  Improved valve placement with coaxial alignment during delivery  Reduced profile in combination with expandable sheath  Improved handle ease of use and ergonomics  Improved PVL performance with the addition of sealing feature PORTICO NEXT GENERATION* **Product not available for sale; remains in development 108
  109. 109. Trifecta GT valve expected to launch globally in 2016 based off best-in-class hemodynamic Trifecta platform TRIFECTA WITH GLIDE TECHNOLOGY * Tissue Valve Market  Remain the gold standard for most patients with aortic stenosis  WW market expected to continue to grow low-single digits Trifecta GT  Next generation Trifecta valve  Improved ease of use while maintaining exceptional hemodynamic performance  Improvement areas include: flexible sewing cuff, streamlined holder, enhanced radiopacity  Initiate launch in key geographies in 1H'16 Trifecta GT *Caution – NOT APPROVED IN THE UNITED STATES. NOT AVAILABLE IN ALL GEOGRAPHIES. 109
  110. 110. PHP addresses a large, growing market and provides meaningful enhancements to competitive offerings HEARTMATE PERCUTANEOUS HEART PUMP (PHP)* *Caution - INVESTIGATIONAL DEVICE, LIMITED BY FEDERAL (OR UNITED STATES) LAW TO INVESTIGATIONAL USE. Significant future market opportunity  $300M+ in 2016, strong double-digit CAGR  ~15% U.S. PCIs are High Risk  Adequate U.S. reimbursement in place Disrupts traditional relationship between profile and flow  Ease of use: prep, delivery, deploy and recapture, profile  Low profile, high flow with stability across the aortic valve Consistent, positive physician engagement  SHIELD II IDE led by leading physicians  High engagement in study completion 15% U.S. PCIs (~850k/year) High Risk 110
  111. 111. Trial Design: Prospective, randomized, multi-center, open-label non-inferiority trial in the U.S. comparing HeartMate PHP to Abiomed® Impella® 2.5 percutaneous cardiac support system Trial Objective Assess the safety and efficacy of the HeartMate PHP in supporting patients with severe symptomatic coronary artery disease with diminished but stable cardiovascular function, who are undergoing elective or urgent high risk percutaneous coronary interventions (PCI) but are not candidates for coronary artery bypass graft (CABG) surgery Scope  Up to 60 sites  425 patients randomized 2:1 (PHP: Impella® 2.5) IDE Trial is evaluating the use of Heartmate PHP to support patients undergoing a high risk PCI procedure HEARTMATE PHP™ SHIELD II TRIAL* *Caution - INVESTIGATIONAL DEVICE, LIMITED BY FEDERAL (OR UNITED STATES) LAW TO INVESTIGATIONAL USE. 111
  112. 112. STJ continues to drive the PCI Optimization market through advancing the standard of care with OCT and FFR PERCUTANEOUS CORONARY INTERVENTION (PCI) OPTIMIZATION PressureWire X* next generation FFR pressure guidewire with excellent steerability, wireless connectivity and designed to be the most reliable sensor technology available OPTIS Mobile brings the value of Angiographic co-registration to the OCT and FFR mobile cart system Continued market opportunity  OCT/FFR market is projected to grow more than 12% (CN) in 2016 to ~$450 million WW STJ is the leader in technology development  OPTIS Integrated, OPTIS Mobile with Angio Co-Registration, PressureWire X* Legacy of strong clinical data providing strong clinical and economic outcomes  FFR: FAME I, FAME II, FAME III  OCT: ILUMIEN I, ILUMIEN II, ILUMIEN III *Caution - INVESTIGATIONAL DEVICE, LIMITED BY FEDERAL (OR UNITED STATES) LAW TO INVESTIGATIONAL USE. 112
  113. 113.  At the October 2015 CPT Editorial Panel meeting, the AMA met and decided specific action relating to the use of OCT  As of Jan 1, 2017, the professional coding to describe use of OCT will fall under CPT codes 92978 and 92979, the same codes as IVUS  The professional component (physician payment) will now be applicable to both OCT and IVUS (vs. IVUS only)  Clinical utility was supported by the publications on the utilization of OCT for PCI optimization, such as ILUMIEN I and ILUMIEN II studies Through STJ’s continued investment in clinical data and strong physician advocacy, improved reimbursement will begin January 1, 2017 OCT REIMBURSEMENT PLANNED FOR U.S. PHYSICIANS 113
  114. 114.  Market opportunity: >100,000 patients/year with a cryptogenic stroke and PFO in the U.S.  AMPLATZER™ PFO Occluder is superior to medical management in reducing recurrent cryptogenic ischemic stroke  Collaborating with FDA in preparation for an FDA Panel Meeting 1H’16 Long-term data recently presented at TCT affirm the clinically meaningful benefit of Amplatzer PFO closure to reduce the likelihood of recurrent cryptogenic stroke AMPLATZER PATENT FORAMEN OVALE (PFO) CLOSURE* *Caution - INVESTIGATIONAL DEVICE, LIMITED BY FEDERAL (OR UNITED STATES) LAW TO INVESTIGATIONAL USE. 1 114
  115. 115. STJ remains committed to renal denervation therapy for hypertension and expects to commence global IDE in 2016 HYPERTENSION – ENLIGHTN RENAL DENERVATION* *Not available for sale in the U.S. Significant future market opportunity  1.2B Worldwide prevalence STJ preclinical efforts validate concept  Sustained blood pressure reductions in hypertensive swine model  Provides confidence in treatment effect STJ expects to begin global IDE in 2016  Sham-controlled, randomized controlled trial  On-going discussions with FDA  Global thought leader steering committee 115
  116. 116. 116  Portico*: Competitive TAVR device provides a meaningful growth engine in 2016  First full quarter of all sizes in Europe exceeded expectations  Expect to continue to accelerate U.S. IDE enrollment  Trifecta GT**: Expected to launch globally in 2016 based off best-in-class hemodynamic Trifecta platform  Heartmate PHP*: Provides meaningful enhancements to competitive offerings for high-risk PCI patients  PCI Optimization: Through continued investment in clinical data and strong physician advocacy, improved reimbursement will begin January 1, 2017  OPTIS Integrated, OPTIS Mobile with Angio Co-Registration, PressureWire X**  Amplatzer PFO Closure*: FDA panel meeting (1H’16)  EnligHTN Renal Denervation**: Committed to renal denervation therapy for hypertension and expect to commence global IDE in 2016 SUMMARY *Caution - INVESTIGATIONAL DEVICE, LIMITED BY FEDERAL (OR UNITED STATES) LAW TO INVESTIGATIONAL USE. **Caution - NOT APPROVED IN THE UNITED STATES. NOT AVAILABLE IN ALL GEOGRAPHIES.
  117. 117. 117 Q&A Panel Moderator: Mike Rousseau, President and CEO Panelists: Keith Boettiger, S.V.P. & General Manager, Chronic Pain and Movement Disorder Therapies Allen Burton, M.D., Medical Director, Neuromodulation, Movement Disorders & Pain, and V.P, Medical Affairs Phil Ebeling, V.P., Chief Technology Officer Eric Fain, M.D., Group President
  118. 118. 118 THANK YOU
  119. 119. 119
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