KEY EXECUTIVES:
Arthur D. Collins, Chairman
William A. Hawkins, President and CEO
Stephen H. Mahle, Executive VP, Healthcare Policy and Regulatory
Gary L. Ellis, Sr. VP and CFO
Susan Alpert, Sr. VP and Chief Regulatory Officer
James P. Mackin, Sr. VP and President, CRDM
Scott R. Ward, President, Cardiovascular
Richard E. Kuntz, Sr. VP and President, Neuromodulation
Steve La Neve, Sr. VP and President, Spinal and Biologics
Christopher J. O’Connell, Sr. VP and President, Diabetes
NO. OF EMPLOYEES: 38,000
GLOBAL HEADQUARTERS: Minneapolis, Minn.
Expanding Our Role.
That is the theme Medtronic Inc. used in its 2008 annual report, and it was an appropriate one, given the steps the company took in the last fiscal year to help shape the future of healthcare. Recognizing that many of its markets were changing, Medtronic funneled more of its fiscal 2008 resources into areas that foster innovation and growth.
“For years, Medtronic has been the leader of the medical technology sector,” William A. Hawkins, Medtronic president and CEO, reminded shareholders in a letter published within the report. “Now, we
The Medtronic Reveal DX insertable cardiac monitor continuously monitors the heart’s electrical activity in order to help physicians diagnose whether or not symptoms such as fainting and dizziness have a cardiovascular cause. Photo courtesy of Medtronic. |
are becoming more. As we enter a new era of healthcare, we are helping to shape what ‘quality’ healthcare means for patients. We are more than a provider of medical devices that save and improve lives. We are [a] leader in understanding the role medical technology plays in diagnosing, treating, monitoring and preventing chronic diseases…The solutions to many healthcare problems will only be resolved when the public and private sectors work together to address issues such as patient access, quality and cost. Medtronic will continue to expand our leadership and meet these challenges head on.”
The company was true to its word in fiscal 2008. It invested more than $1.2 billion, or about 10 percent of its total revenue, in research and development. Medtronic also formed a new group called Strategy and Innovation, which combined the company’s Corporate Strategy, Business Development, Ventures, and Science and Technology functions. The new group is responsible for identifying R&D opportunities that extend beyond what individual business units would develop on their own.
Medtronic expanded its role in the spinal market with the November 2007 acquisition of Kyphon Inc., a Sunnyvale, Calif.-based company that develops devices that restore and preserve spinal function using minimally invasive technology. Executives with both companies said the $4.2 billion acquisition enabled Medtronic to solidify its footprint in the spinal device sector. The merger has already had an impact on Medtronic’s bottom line: In fiscal 2008, Kyphon contributed $298 million of revenue to the Spinal business.
In keeping with its mission to expand its role in healthcare, Medtronic acquired Restore Medical Inc., a St. Paul, Minn.-based firm that makes medical devices to treat sleep disorders such as snoring and sleep apnea. A Medtronic executive said the $29 million merger helped fill a hole in the company’s product portfolio. Though Medtronic sells products that help surgeons remove soft tissue from upper airways, the July 2008 acquisition has enabled the company to offer doctors alternative systems that are less invasive and traumatic and can be used on patients that do not undergo surgery.
Medtronic also beefed up its Cardiac Rhythm Disease Management (CRDM) segment late last year with the $387 million acquisition of CryoCath Technologies Inc., a Montreal-based firm that manufactures products to treat cardiac arrhythmias. The move gives Medtronic access to CryoCath’s flagship product, Arctic Front, a minimally invasive cryo-balloon catheter designed specifically to treat atrial fibrillation. The device is available in Europe but still being studied in the U.S. and Canada.
Medtronic’s CRDM segment is one of the most profitable for the company. In fiscal 2008, the segment generated $4.96 billion in sales, a 2 percent increase compared with the $4.87 billion in sales the company reported in fiscal 2007. Favorable foreign currency exchange rates contributed about $160 million to the total.
The $4.96 billion in CRDM sales comprised more than one-third of the $13.5 billion in sales the company took in between April 27, 2007 and April 25, 2008. That overall sales figure represented a 10 percent increase compared with the $12.29 billion Medtronic reported in fiscal 2007. Favorable foreign currency exchange rates boosted sales by about $400 million.
Medtronic’s Spinal segment, which markets products such as bone growth substitutes, and devices for vertebral compression fractures and spinal stenosis, experienced the most significant growth in fiscal 2008, expanding 23 percent. That segment posted $2.98 billion in sales.
The Cardiovascular business generated $2.13 billion in sales, a 12 percent jump compared with the $1.9 billion in sales the segment reported in fiscal 2007.
Products marketed and sold within this division include coronary and peripheral stents and related delivery systems, endovascular stent graft systems, heart valve replacement technologies and tissue ablation systems, and open heart and coronary bypass grafting surgical products.
Medtronic’s Neuromodulation segment reported $1.3 billion in sales, an 11 percent increase compared with the $1.18 billion in sales posted in fiscal 2007.
Sales in the company’s Diabetes segment grew 18 percent, reaching $1 billion, while sales of Surgical Technologies products (used to treat conditions of the ear, nose and throat) swelled by 17 percent, totaling $780 million. Physio-Control sales fell 15 percent, dropping to $329 million from $385 million in fiscal 2007.
Sales of (cardiac) pacing systems were $2 billion, a 6 percent increase compared with the $1.8 billion Medtronic reported in fiscal 2007. Defibrillation system sales fell 1 percent, slipping to $2.89 billion.
Executives attributed the decline to the voluntary “market suspension” of the company’s Sprint Fidelis defibrillation leads due to the possibility of lead fractures. The recall had triggered dozens of lawsuits from patients with Fidelis leads (a thin electronic cable) connected to their hearts. These patients were forced to decide whether to undergo risky surgery to remove the faulty device.
At the time of the recall, Medtronic officials claimed the malfunctioning device killed five patients, but they later revised that number to 13. Earlier this year, a federal judge dismissed the lawsuits associated with the Fidelis lead recall, ruling that Congress can make it easier (legislatively) for patients to sue device makers.
Though Medtronic dodged that bullet, the company spent $123 million to settle 2,682 legal claims over its Marquis line of implanted cardiac defibrillators.
The company warned consumers in 2005 about a potential battery shorting problem in various Marquis-brand defibrillators. About 11,000 Marquis defibrillators were surgically removed from U.S. patients and replaced with a safer device; an additional 2,000 patients overseas had the defibrillator removed.
Despite these setbacks, Medtronic launched a number of new products in fiscal 2008, including Prestige, the first cervical artificial disc for the spine to be approved in the United States; Endeavor, a “second-generation” drug-eluting coronary stent, and RestoreULTRA, a small, thin rechargeable neurostimulator.