Corporate Investment in StartUps Rachael Scherer Vice President, Marketing Medtronic, Inc'

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Corporate Investment in Start-Ups Rachael
SchererVice President, MarketingMedtronic, Inc.
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Medtronic Mission
Medtronic the Company
To contribute to human welfare by application
of biomedical engineering in the research,
design, manufacture and sale of instruments or
appliances that alleviate pain, restore health
and extend life.
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Medtronic History
Founded in 1949 as a medical equipment service
company
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Medtronic Solutions Restore Health
Heart Valve Disease
Atrial Arrhythmias
Scoliosis
Heart Failure
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We Diversified Into Attractive Markets
Balanced Growth US12.3 Billion Net Sales (Fiscal
Year 2007)
Cardiac Surgery 6
ENT 4
CRDM 47
Diabetes 6
Vascular 8
Neurological 9
Spine/Navigation 20
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Medtronic Global Reach
Eastern Europe Central Asia
Canada
Europe
USA
Asia Pacific
Middle East/ Africa/India
Latin America

• International
• Western Europe
• Canada
• Emerging Markets
• Latin America
• Eastern Europe
• Middle East/Africa/India

• Asia-Pacific
• Japan
• Australia
• China
• ASEAN
• Korea

• Salesin 120 Countries
• Offices in 44 Countries
• 36,000 employees world wide

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Ingredients to Drive Growth are in Place
In billions
22B - 24B
12B
US
INTL
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RD Spending Continues To Increase
1Billion
191 Million
FY95
FY07
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Productive RD New Products
2/3 of revenues are from products introduced
within the past 2 years
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Medtronic Mission
Medtronic the Investor
To contribute to human welfare by application
of biomedical engineering in the research,
design, manufacture and sale of instruments or
appliances that alleviate pain, restore health
and extend life.
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What is Required to Sustain Growth?
Annual Incremental Revenue Required to Sustain
15 Growth
( in Billions)
4.7
4.1
3.5
3.1
2.7
2.3
2.0
1.8
1.5
1.3
FY
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We Have Ample Financial Flexibility
Free Cash Flow and Cash Available for Investment
Free Cash Flow (Billions)
Cash Available for Investment (Billions)
Free Cash Flow (Operating Cash Flow less Cap Ex)
Cumulative Cash Balance
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We Diversified Into Attractive Markets
Balanced Growth US12.3 Billion Net Sales (Fiscal
Year 2007)
Cardiac Surgery 6
ENT 4
CRDM 47
Diabetes 6
Vascular 8
Neurological 9
Spine/Navigation 20
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Evaluating New Growth Platforms, Strengthening
Existing Growth Platforms

• White Space will augment top growth, diversify
  business, geographic and payor mix
• Aggressive global scouting efforts continue to
  identify new technologies
• Minority investment portfolio provides early
  access to new technology
• We will identify new business platforms where we
  add value and leverage Medtronic strengths

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Business Development Strategy

• Disruptive technologies in therapeutic areas of
  interest
• Extension of existing technologies into new
  therapeutic areas
• Drug partnering
• Procedure solutions (how do we make therapies
  more efficacious, safer, less invasive and more
  convenient)
• Sensors and closed loop systems
• Miniaturization

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Minority Investment Strategy

• Extend eyes and ears for key emerging
  technologies
• Board seat or board observer seat
• Membership on scientific advisory board
• Create bonds to enhance ability to negotiate
  future investments
• Development agreements
• Distribution rights
• Gain certain option rights
• Right of first offer
• Right of first refusal

Medtronic currently has 200M in active
investments in over 70 companies
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Minority Investment ExamplesPast Present

• Equity Investments
• Volcano / IVUS
• First investment in 2002, Licensing agreement in
  2003
• Equity financing used to develop IVUS products
• Up-front payment for technologies used in
  Medtronic products
• Volcano completed successful IPO in mid-2006
  Medtronic still a shareholder.
• CardioMEMS / Wireless Sensing Communications
• In 2005, Medtronic made entered into a license
  and joint product development program.
• Equity investment and series of milestone
  payments
• Medtronic has overall responsibility bears
  cost for clinical and regulatory
• CardioMEMS began IPO process, but has opted to
  remain private, for now
• Spinal Dynamics / Artificial Disk
• Initial investment in 2001, Medtronic became
  exclusive OUS distributor of Bryant disc
• In 2003, Medtronic acquired Spinal Dynamics for
  270M
• Bryant disc expected to go to FDA Panel this
  Fall

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Case study Neurologix Collaboration

• Neurologix, Inc. And Medtronic, Inc. Agree To
  Develop Gene Therapy Infusion Catheters
  Medtronic Makes A Further 2 Million Equity
  Investment In Neurologix
• Medtronic will manufacture, delivery devices for
  Neurologix's Parkinson's disease and temporal
  lobe epilepsy clinical programs
• Two companies will have a revenue-sharing
  arrangement
• Medtronic increased its equity investment in
  Neurologix by 2.0

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Case study Alnylam Collaboration

• Scope
• Collaboration to develop novel siRNA-device
  treatments for neurodegenerative diseases
• Begin with exploration of one target/disease
  huntington in Huntingtons Disease (HD)
• Roles
• Discovery and early development of siRNA
  component
• To Clinical Proof of Concept completion of
  Phase IIa
• Late-stage development of siRNA component
• All development of Device component
• Commercialization of siRNA-Device combination

Alnylam
Medtronic
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Minority Investment ExamplesPast Present

• Equity Investments
• Volcano
• CardioMEMS
• Spinal Dynamics
• Neurologix Collaboration (case study)
• Alnylam Collaboration (case study)
• Larger than Life deals
• Minimed
• Vidamed

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Process
Clear fit with MDT business
White Space Opportunities

• Investment Committee

Investment Committee
Corporate Development
Strategy Committee
Medtronic Business Units
Several Sources
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Acquisition Goals

• Acquire new strategic platforms focused on
  treatment of chronic disease
• and
• Acquire businesses or product lines
  complimenting or supplementing existing
  businesses
• Enhance Revenues!

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Acquisitions Strengthen/Broaden Existing Business
Cardiac Surgery
Vascular
CRDM
Neuro Surgery
Patient Mgmt
Surgical Navigation

• BioMedicus 1990
• DLP 1994
• Avalon 1994
• Electromedics 1994
• Carbon Implants 1994
• Avecor 1999
• Coalescent 2004

• Instent 1996
• AVE 1999
• PercuSurge 2001
• TVI2003
• Radius2004
• AngioLink2004

• Vitatron 1986

• Midas Rex 1998

• Intelex 2000
• Odin 2005

• PaceArt 2001

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Acquisitions Expand into New Strategic Platforms
Prior Acquisitions
Current Interests
Biotechnology Cancer Dental Hearing Hypertension
Obesity Ophthalmology Orthopedics Urology/Gynecolo
gy Stroke
Heart Valves JJs Tissue Valve Business
(1988) Cardiopulmonary JJs Oxygenator
Business (1988) Coronary Vascular Versaflex
(1989) / IMI (1989) Neuro/Gastro/Uro Diagnostics
Synectics/Dantec (1994) Peripheral Vascular/AAA
MIS (1995) AneuRx (1997) External
Defibrillators Physio Control (1998) Spinal
Sofamor Danek (1999) Neurosurgery PS Medical
(1995), SNT (1999) ENT Xomed (1999) Diabetes
MiniMed/MRG (2002) BPH VidaMed (2002) GERD
Endonetics (2002) Artificial Discs Spinal
Dynamics (2003)
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Why Would You Want Medtronic as an Investor?

• Expertise of entire Medtronic science
  organization available to our partners
  (with/without CDAs)
• Medtronic will keep ownership below control
  position (unless investment moves to acquisition)
• Medtronic invests for strategic reasons. We
  dont like to lose , but generally run our
  portfolio to learn about technology and markets
• Medtronic wont tell you how to run your
  business generally looks to be Board observer,
  not Board member

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