Medtronic, Inc.

Dana Lindley

HCA459: Senior Project (BGM1046A

Instructor: Kristin Akerele

November 18, 2010

Medtronic, Inc. Is changing the face of chronic disease. By working closely with the physicians around the world, they create therapies to help patients do things they never thought possible. Their medical technologies help make it possible for millions of people to resume everyday activities, return to work, and live better, longer. They are able to do this with the help of some very special people around the world: 38,000 dedicated employees who share a passionate purpose to improve lives, thousands of medical professionals who share their insights and ideas, and hundreds of advocacy associations that help us share information so people with debilitating diseases know relief is possible. MEDTRONIC PURPOSE Medtronic is one of the largest medical technology companies that manufactures implantable biomedical devices, with sales in over 120 countries. The Company treats chronic diseases by offering products including bradycardia pacing, heart failure, atreal fibulation, coronary vascular disease, heart valve replacement, etc. They operate Cardiac Rhythm Disease Management, Spinal and Biologicals, CardioVascular, Neuromodulation, Diabetes, and Surgical Technologies. Medtronic, Inc. was founded in 1949 by Earl Bakken and his brother in law Palmer Hermundslie out of their garage in northeast Minneapolis, Minnesota. They turned their garage into a medical equipment repair shop. They originally wanted to sell basketball pumps since there was a shortage of them in the Midwest during this time. Bakken was a grad student in electrical engineering at University of Minnesota before he gave up his studies to focus on their new company. Bakken got to know a gentleman named C. Walton Lillihei through the repair business. He was a pioneer in heart surgeries at the University of Minnesota Medical School. Lillihei was upset with the types and availability of pacemakers. He contracted with Bakken to design a new style with a power source that didn’t require being plugged into the walls, as the present ones. This idea came toLillihei since one of his pediatric patients was dependent on this unit when a severe power failure hit over a Halloween night, and the little boy died. Bakken modified a design for a transistorized musical metronome to create the first battery powered artificial pacemaker. Although Medtronic built nearly 100 custom devices during the 1950’s, only 10 were actually part of the official product line. In addition to pacemakers, these included 2 external defibrillators, forceps, and animal respirator, a cardiac rate monitor, and a physiologic stimulator.
MISSION
Co-founder Bakken was inspired by his patients when he created the Medtronic Mission, which is a very integral part of the company’s culture. He was overcome by the patients emotional responses to the products. The patients were overjoyed for their ability to regain their mobility, to feel better, and sometimes to just be alive because of Medtronic’s work. Earl wanted the human benefit to be the company’s main purpose so he and the board of directors created a formal statement of the company’s objectives. Almost ½ a century later the Mission statement still serves as part of the ethical framework and an inspiration to the employees all around the world. It serves as a day to day guide to remind them that their efforts are changing the way millions of people face chronic disease.
MISSION STATEMENT • To contribute to human welfare by application of biomedical engineering in the research, manufacture and sale of instruments or appliances that alleviate pain, restore health, and extend life. • To direct our growth in the areas of biomedical engineering where we display maximum strength and ability to gather people and facilities that tend to augment these areas to continually build on those areas through education and knowledge, assimilation to avoid participation in areas where we cannot make unique and worthy contributions. • To strive without reserve for the greatest possible reliability and quality in our products to be the unsurpassed standard of comparison and to be recognized as a company of dedication, honesty, integrity and service. • To make a fair profit on current operations to meet our obligations, sustain our growth and reach our goals. • To recognize the personal worth of employees by providing an employment framework that allows personal satisfaction to work accomplished, security, advancement opportunities, and means to share in the company’s success. • To maintain good citizenship as a company. (2004 Annual Report, 2004). CORE VALUES Their mission is to improve the health of people and communities through focus, innovation and leadership. In all that is done, they are guided by six core values: • Integrity-We’re thoughtful and consistent in our approach, conducting our work in a spirit of respect and openness. • Inclusiveness- We seek the full participation of all people in our programs and staff • Partnership- We’re respectful and communicate openly, believing that we have much to learn and much to offer. • Empowerment- We believe ordinary people are capable of extraordinary things and that empowered people feel a responsibility to themselves and their communities. • Constancy- We’re persistent in our efforts, recognizing that true impact requires long-term commitment. • Quality- We work to achieve and sustain excellence in all that we do. (Medtronic, Inc., 2007).
FINANCIAL
Based on information from annual report for fiscal year ending April 24, 2009. • Net earnings in the 1st quarter of fiscal 2010 was $445 million. Fiscal year 2010 was a decrease of 38% with net earnings compared to 2009 of $773 million. • Net sales in 1st quarter of 2010 were $3.933 million, up 6% from 2009, Net sales increase in 2010 was due to the double digit growth in the Diabetes & Surgical Technologies businesses and continued positive sales growth in the other operating segments.
Diversity and depth for the current products offered ena le to provide medical therapies to patients worldwide. The instruments made in research and development, strategic acquisitions, expanded clinical trials and infrastructure are the basis for growth. ("SummaryofMEDTRONIC INC - Yahoo!Finance," 2009). Medtronic has both cash and ambition, and they want to create and acquire new products and technologies for its core cardiac, spinal, diabetes and neuroscience treatments. The company has focused on cost controls, with potential savings of over $1Billion by 2012. Medtronic has vowed to pay out over 40% of its cash flow in stock buybacks and dividends. It should help push their stock up to 25%-30% in the next 12 months. (Granby, 2009).
ACQUISITIONS-FUTURE DIRECTION In July 2000, Medtronic acquired Restore Medical , Inc. Their shareholders got $1.60 per share cash for each share of Restore common stock. Total paid cash was $29 million. Their product-Pillar Palatal Implant System-provides a minimally invasive, medical device that is implanted and is used to treat different types of sleep breathing disorders, including sleep apnea and snoring. More recent acquisitions are: • Feb. 23, 2009- Acquired Ventor Technologies. They are the developer of transcatheter heart valve technologies for treatment of aortic valve disease. • April 9, 2009- Acquired CoreValve, Inc. They develop percutaneous catheter based, transfemoral aortic valve replacement products. • June 2, 2009- Acquired New Diabetes Technology. Purchased substantially all glucose monitoring assets from PreciSense A/S, a Denmark based development company focused on continuous glucose monitoring (CMT) technology. • April 21, 2010- Acquired Invatec and affiliated companies. They are recognized for developing novel devices for treatment of coronary and peripheral vascular disease. This acquisition will spee up the growth of Medtronics’ CardioVascular business. • April 29, 2010- Acquires ATS Medical. They are the leading developer, manufacturer, marketer of products and services focused on cardiac surgery, including heart valves and cryoablation technology. (Medtronic, Inc., Newsroom, 2010).
DEMOGRAPHICS
Medtronic has a healthy, diverse revenue base and a strong balance sheet. Trading is at a premium due to diverse business combinations, rich cash flow that offers management opportunities to supplement internal growth with more acquisitions and stock repurchases. Their favorable demographics and trends will drive their growth. Their overall customer base is expanding domestically and overseas as changing demographics and rising standards of living will demand a steady stream of new and improved medical products. Marketing consensus for 2004-05 was to be around 15% growth. Research and Development (R & D) expenditures have continued to pay off. The FDA approved their CD Horizon Legacy 5.5 Spinal System. Medtronic’s Physio-Control division announced a partnership with Walgreens to sell automated external defibrillators online. (Luong, Kapadia, Peters, Wannamacher, 2004).

GOVERNMENT REGULATION AND OTHER CONSIDERATIONS The medical devices provided by Medtronic are regulated by many government agencies, which include the FDA and comparable foreign agencies. Medtronic is required to comply with laws and regulations governing the development, testing, manufacturing, labeling, marketing and distribution. In order to commercially distribute new medical devices in the US, it has to be authorized in one of two ways. The first way is known as 510K which requires demonstrations that the new device is substantially equal to a legally marketed medical device. Data must be submitted to support the claims. If human trials data are required, it must be done with FDA investigational device regulations. The FDA must release an order that finds substantial equivalence before the device can be commercially distributed. If their device is needing to be modified, without have to go through the 510K process again, it can as long as the modifications don’t change the safety or effectiveness by much. The second way which is more rigorous, is known as the pre-market approval (PMA), which requires independent demonstration that will show the unit is safe and effective. This is part of the human clinical trial data for the device. The FDA will authorize commercial release of it if it decides that they are reasonably sure that the device is safe and works properly. Doing this way is both more time consuming and more expensive. Before and after a product has FDA approval for release, they review the design and manufacturing practices, labeling and record keeping, and all manufacturer’s required reports of adverse experiences and other information that could identify possible problems with the marketed medical device. The company may be subjected to periodic inspections by the FDA for compliance with FDA regulations. These regulations are known as Quality Systems Regulations, which decide the methods used, the facilities and controls used for the design, manufacture, packaging and servicing of all finished medical devices intended for human use. If the FDA found the company in non-compliance with laws and regulations, or of any of the devices posed a possible health risk, the FDA could ban the device, detain or seize the faulty units, order a recall, repair or replace, or refund for the devices, plus physicians and other professionals would be notified about the devices that were questionable in posing a substantial harm to the public health. The FDA can also place use restrictions on certain devices. The FDA can also recommend prosecution. Federal and state laws protect the patients’ confidentiality, patient records and restrict the use and disclosure of protected information. This is done due to the Health Information Portability and Accountability Act of 1995 (HIPAA). It covers the use and disclosure of protected health information by “Covered Entities” which are healthcare providers that submit electronic claims, health plans, and health care clearinghouses.
DIRECTION
Through their key businesses, there is partnership between medical professionals and life-changing technologies that will improve the way that chronic diseases are treated. Even though much of the work happens at the business level, several cross-business groups have helped with leveling best practices, knowledge, and technologies across the company. They include:
Medtronic International- which leads operations, sales, and distribution outside the US.
Quality and Operations- relentlessly drives continuous process improvement thgouthout the company to support a key tenet of their Mission: to strive without reserve for the greatest possible reliability and quality in their products.
Strategy and Innovation- coordinates research and development capabilities acteoss the entire company, especially when combined with multiple technologies to improve the therapies. This group also evaluates growth opportunities to strategically allocate new investment money.
Healthcare Policy and Regulatory- provides a strategic approach to policy issues that affect the entire medical technology industry.
DIVERSITY
To change the way chronic disease is viewed, fresh ideas and diverse insights are needed. People with differing backgrounds and perspectives are welcomed. Out of the 38,000 highly skilled employees working at Medtronic, they bring distinct insights based on his or her combination of gender, age, culture, ethnicity, religion, abilities, sexual orientation, education, and upbringing. These differences are a powerful asset because they reflect the diverse nature of our global marketplace, customers, and patients.
SUPPLIER DIVERSITY A diverse base of highest quality suppliers strengthen the ability to carry out the Mission to alleviate pain, restore health, and extend lives. A diverse supply chain, focused on the highest standards of quality, helps us connect with the patients, physicians, and communities as work is done to improve lives.
PRODUCT LINE Medtronic is basically composed of 6 main business units which develop and manufacture devices and therapies used to treat more than 30 chronic diseases, including but not limited to heart failure, Parkinsons’ Disease, urinary incontinence, obesity, chronic pain, and diabetes. Cardiac Rhythm Disease Management (CRDM)- the oldest and largest of Medtronic business units. Heart rhythm therapies dates back to 1957. • Implantable Pacemakers-to treat slow heart beats; fainting spells • Implantable cardiac resynchronization therapy devices (CRT’s)- synchronizes the beating of left and right heart chambers to optimize pumping. • Implantable Cardioverter-defibrillators (ICD)- monitoring and correcting heart rates that are dangerously out of rhythm. • Monitoring systems- links wearers of implantable devices with their physicians via the internet. Spinal and Biologics- second largest business. Collaboration are with world renown surgeons, researchers, and innovative partners to offer state of the art therapies for spinal, neurological, orthopedic, and oral maxillofacial conditions. • Minimal Access Spine Technologies (MAST)- treats painful conditions of the spine, such as degenerative disc disease. • Fusion Systems- correct and stabilizing abnormal spine curves. • Artificial Cervical Discs- to replace damaged or degenerated idscs in the neck. Latest disc is made of surgical grade stainless steel and allows motion. • Infused Bone Graft- a biologic that stimulates the body to regrow bone and is used to treat certain spinal, tibial and maxillofacial conditions. CardioVascular- these products which are developed in collaboration with leading physicians are used to reduce the potentially debilitating effect of coronary, aortic, and structural heart disease. • Angioplasty technologies-treats arteries that are blocked by atherosclerosis plaque and restores blood flow to the heart. • Stent graphs- used to treat aneurysms. • Heart valve and valve repair- treats congenital heart defects and valve disease. • Open heart and coronary bypass graft products- restores blood flow to heart. Neuromodulation- this division was formed as their expertise transferred to heart electrical stimulator to treat diseases and conditions involving the nervous system. • Activa Deep Brain Stimulation Therapy- uses an implanted neurostimulation system to stimulate specific targets in the brain to treat Parkinson’s Disease, etc. • Medtronic Pain Therapies- encompasses pain management therapies from neurostimulation and drug related drug delivery areas. • InterStim Therapy for Urinary Control- only implantable treatment to use electrical stimylation of the sacral nerves to manage the disabling symptoms of overactive bladder. • Intrathecal Baclofen Therapy (IBT Therapy)- uses intractiable spacticity in patients with cerebral palsy, traumatic brain injury, and stroe by delivering baclofen injections directly into the intrathecal space in small precisely controlled doses with a pump implanted in the abdomen. • Prostiva RF Therapy- an in office treatment for men over 50 suffering from enlarged prostate. Diabetes- insulin pump therapy began in 1983. • Advanced insulin delivery system- delivers life saving insulin therapy. • Continuous Glucose Monitoring devices- monitors body glucose levels in real time. • Data management software- helps patients and providers optimize diabetes management and improve quality of life. Surgical Technologies- designs and manufactures devices for the diagnosis and treatment of ear, nose, and throat (ENT) diseases and cranial, spinal and neurologic conditions. • Ear, Nose & Throat (ENT)- provides relief to patients with ENT disorders such as sinusitis, diseases of head and neck, thyroid conditions, and sleep-disordered breathing. • Neurological Technologies- develops devices and implantable products for the treatment of cranial, spinal, and neurological diseases, including hydrocephalus, spinal disorders, cranial tumors, and vascular lesions. • Navigation- surgical navigation and intraoperative imaging solutions delivers real time feedback on patient anatomy, instrument position, pathology status, and therapy placement for both pre-operative procedure planning and intraoperative confirmation. After much research on this multi-million dollar corporation, I have come to the decision that this is a very important to the health and well being of millions of patients with many varieties of disabilities, or medical conditions. I am very acquainted with this company as I am one of the patients that has two neurostimulators implanted in my spine. These are for pain management of a nerve disorder now known as Chronic Regional Pain Syndrome. I supplement the use of these units with a variety of medications. I can truthfully say that since the implant date of December 2004, I have had considerable relief for the pain that I suffer. I have a quality of life that without these units I most likely would not have. I am very grateful to the founders of this company because without them, I do not know what condition I would be in today.

References
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Luong, B. Q., Kapadia, K., Peters, M., & Wannamacher, R. (2004, April 4). Medtronic Thats a lot of Solid Heart Beats (Undergrad report). Retrieved May 22, 2010, from SMU/Cox School of Business website: http://people.smu.edu/undergrad_practicum/reports/04/buy/mdt.pdf
Medtronic, A. (2010). Medtronic's life-changing therapies are transforming the face of chronic disease. Retrieved May 21, 2010, from http://www.medtronic.com/about-medtronic/index.htm
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