| • | Broad and deep technological knowledge of microelectronics, implantable devices and techniques, power sources, coatings, materials, programmable devices and related areas, as well as a tradition of technological pioneering and breakthrough products that not only yield better medical outcomes, but more cost-effective therapies. | |
| • | Strong intellectual property portfolio that underlies our key products. | |
| • | High product quality standards, backed with stringent systems to help ensure consistent performance that meet or surpass customers’ expectations. | |
| • | Strong professional collaboration with customers, extensive medical educational programs, and thorough clinical research. | |
| • | Full commitment to superior patient and customer service. | |
| • | Extensive experience with the regulatory process and sound working relationships with regulators and reimbursement agencies, including leadership roles in helping shape regulatory policy in the major markets in which we operate. | |
| • | A proven financial record of sustained revenue and earnings growth and continual introduction of new products. |
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We currently function in seven operating segments that manufacture and sell device-based medical therapies. During the first quarter of fiscal year 2008, we revised our operating segment reporting to combine our former Vascular and Cardiac Surgery businesses into the new CardioVascular operating segment. Additionally, the Navigation business was separated from Spinal for most of fiscal year 2008 and was reported as part of a stand alone segment named Corporate Technologies and New Ventures. In the fourth quarter of fiscal year 2008, the decision was made to include the Navigation business as a component of the Ear, Nose and Throat segment, which was renamed Surgical Technologies to reflect the expanding scope and focus of this business. Our operating segments are:
| • | Cardiac Rhythm Disease Management |  |
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| • | Spinal | ||
| • | CardioVascular | ||
| • | Neuromodulation | ||
| • | Diabetes | ||
| • | Surgical Technologies | ||
| • | Physio-Control |
The chart above shows the net sales and percentage of total net sales contributed by each of our operating segments for the fiscal year ended April 25, 2008 (fiscal year 2008).
With innovation and market leadership, we have pioneered advances in medical technology in all of our businesses and enjoyed steady growth. Over the last five years, our net sales on a compound annual growth basis have increased more than 12 percent, from $7.665 billion in fiscal year 2003 to $13.515 billion in fiscal year 2008. We attribute this growth to our commitment to develop or acquire new products to treat an expanding array of medical conditions. In the coming decade, we anticipate that technology advancements, the Internet, and increasing patient participation in treatment decisions will transform the nature of healthcare services. Medtronic is positioned to deliver on this promise of integration across device technology, biotechnology, and information technology by building on trusted partnerships with caregivers; leveraging our scale, scope, and expertise; and benefiting patients worldwide.
We will accomplish this goal by operating as ONE Medtronic, reaching within and across our operating segments to make the whole of Medtronic greater than the sum of its parts. The main tenets of this approach are:
| • | Driving sustainable long-term growth through innovation | |
| • | Strong focus on improving operating margins | |
| • | Delivering EPS growth and disciplined capital allocation | |
| • | Aligning the organization for relentless and consistent execution |
Our primary customers include hospitals, clinics, third party healthcare providers, distributors, and other institutions, including governmental healthcare programs and group purchasing organizations.
Cardiac Rhythm Disease Management (CRDM)
CRDM is the world’s leading supplier of medical devices for cardiac rhythm disease management. We pioneered the modern medical device industry by developing the first wearable external cardiac pacemaker in 1957, and manufactured the first reliable long-term implantable pacing system in 1960. Since then, we have been the world’s leading producer of cardiac rhythm technology, and from these beginnings, a $10 billion industry has emerged. Today, our products and technologies treat and monitor a wide variety of heart rhythm diseases and conditions.
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Conditions Treated
Natural electrical impulses stimulate the atria and ventricles, the heart’s chambers, to rhythmically contract and relax with each heartbeat. Irregularities in the heart’s normal electrical signals can result in debilitating and life-threatening conditions, including sudden cardiac arrest, one of the leading causes of death. Physicians rely on our CRDM products to monitor and correct these irregularities and restore the heart to its normal rhythm. Our CRDM products are designed to treat and monitor a broad range of heart conditions, including those described below.
| • | Bradycardia — abnormally slow or unsteady heart rhythms, usually less than 60 beats per minute, or unsteady heart rhythms that cause symptoms such as dizziness, fainting, fatigue, and shortness of breath. | |
| • | Tachyarrhythmia — heart rates that are dangerously fast or irregular. In the lower chambers of the heart, called ventricles, this is called ventricular tachycardia or fibrillation and can lead to sudden cardiac arrest. In the upper chambers, called the atria, this is called atrial arrhythmia which can affect blood flow to the body and increase the risk of stroke. | |
| • | Heart Failure — impaired heart function resulting in the inability to pump enough blood to meet the body’s needs, characterized by difficulty breathing, chronic fatigue and fluid retention. | |
| • | Sudden Cardiac Arrest — condition when the heart’s ventricles suddenly develop a rapid, irregular rhythm (ventricular fibrillation) and the quivering ventricles cannot pump blood to the body, which, without immediate treatment, will almost always lead to death. | |
| • | Syncope — a sudden loss of consciousness, which occurs when the blood pressure drops and not enough oxygen reaches the brain. Causes vary and include heart-related conditions, exhaustion, stress, overheating, illness and certain medications. | |
| • | Atrial Fibrillation — condition when the atria quiver instead of pumping blood effectively. Blood in the atria may pool and clot. If a clot breaks loose and advances to the brain, a stroke can result. |
The charts below set forth net sales of our CRDM products as a percentage of our total net sales for each of the last three fiscal years:
We offer the broadest array of products in the industry for the diagnosis and treatment of heart rhythm disorders and heart failure. Because many patients exhibit multiple heart rhythm problems, we have developed implantable devices that specifically address complex combinations of arrhythmias. In addition to implantable devices, we also provide leads, ablation products, electrophysiology catheters, and information systems for the management of patients with our devices. Our CRDM devices are currently implanted in more than 3 million patients worldwide.
Implantable Cardiac Pacemakers. Bradycardia is a common condition, with hundreds of thousands of patients diagnosed each year, and millions of people worldwide suffering from its effects. The only known treatment for this condition is a cardiac pacemaker, a battery-powered device implanted in the chest that delivers electrical impulses to stimulate the heart to beat at an appropriate rate.
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Pacemaker technology has extended the lives of millions of patients with heart rhythm conditions, and each year nearly 1 million pacemakers are implanted in patients worldwide. Medtronic’s Adapta family of fully automatic pacemakers, which includes the Adapta, Versa, and Sensia models, incorporates an array of automatic features to help physicians improve pacing therapy and streamline the patient follow-up process, potentially minimizing the amount of time spent in a physician’s office. An example is Atrial Capture Management, which is intended to automatically adjust impulses for optimal stimulation of the heart’s upper right chamber. Adapta offers a pacing mode called Managed Ventricular Pacing (MVP), which enables the device to be programmed to minimize unnecessary pacing pulses to the right ventricle. Clinical studies have shown that unnecessary pacing in the right ventricle can increase the risk for heart failure and atrial fibrillation. In September 2007, the results of the Search AV Extension and Managed Ventricular Pacing for Promoting Atrioventricular Conduction (SAVE PACe) trial, funded by Medtronic, were published in the New England Journal of Medicine. This trial of more than 1,000 patients showed that reducing right ventricular pacing to less than 10 percent in patients with dual chamber pacemakers reduced the relative risk of developing persistent atrial fibrillation by 40 percent compared with conventional dual chamber pacing. MVP has been shown to reduce the amount of right ventricular pacing to less than 5 percent, compared to 50 percent or more from devices with typical dual-chamber pacing. The Adapta family leads our portfolio of pacemakers, which also includes the EnRhythm and EnPulse families.
Following the launch of our international trial in February 2007 of 350 patients, in January 2008 we announced the start of a United States (U.S.) clinical trial of 470 patients to confirm the safety and efficacy of the Medtronic EnRhythm MRI SureScan pacing system, the first-ever pacemaker system to be developed and tested specifically for safe use in Magnetic Resonance Imaging (MRI) machines under specified scanning conditions. The EnRhythm MRI SureScan pacing system consists of the dual-chamber EnRhythm MRI SureScan pacemaker and CapSureFix MRI SureScan pacing leads. Currently, individuals with implanted cardiac devices such as pacemakers, implantable cardioverter-defibrillators (ICDs) and cardiac resynchronization therapy (CRT) devices are prohibited from receiving MRI scans, since MRI machines may interact with traditional systems, potentially compromising therapy and patient safety. While improvements to pacing technology have continued since its development nearly 50 years ago, this advance marks a concerted effort to pursue compatibility with MRI scans, an important healthcare diagnostic procedure.
Implantable Cardioverter-Defibrillators. Approximately 7 million people worldwide have tachyarrhythmia. Tachyarrhythmia is a potentially fatal condition that can lead to sudden cardiac arrest, the sudden and complete cessation of heart activity. Sudden cardiac arrest is one of the leading causes of death in the U.S. responsible for more than 310,000 deaths annually, with most due to ventricular fibrillation. ICDs are stopwatch-sized devices that continually monitor the heart and deliver appropriate therapy when an abnormal heart rhythm is detected. Several large clinical trials have shown implantable defibrillators significantly improve survival as compared to commonly prescribed antiarrhythmic drugs. In 2005, the results of Sudden Cardiac Death in Heart Failure Trial (SCD-HeFT), sponsored by the National Institutes of Health, with funding provided by Medtronic, were published in the New England Journal of Medicine. This 2,521 patient trial, the largest ICD trial ever conducted, showed ICDs reduced death by 23 percent in people with moderate heart failure compared to those who did not receive ICDs. Also in 2005, the Centers for Medicare and Medicaid Services expanded coverage of ICDs for Medicare beneficiaries who meet SCD-HeFT indications. Despite the mounting evidence demonstrated in clinical trials such as SCD-HeFT, only about 35 percent of all patients in the U.S., and significantly less outside the U.S., who are indicated for an ICD actually receive one, leaving hundreds of thousands of people at an increased risk for sudden cardiac death. Our Virtuoso family of dual and single chamber ICDs offer unique features including Anti-tachyarrhythmia Pacing (ATP) During Charging, OptiVol Fluid Status Monitoring, our pacing mode “MVP”, and Conexus Wireless Telemetry with SmartRadio. ATP During Charging is a feature that automatically uses pacing pulses to stop fast, dangerous heartbeats, while concurrently preparing to deliver a shock, if needed, with no delay. OptiVol automatically monitors fluid status in the thoracic cavity, the chest area encompassing the lungs and heart. The accumulation of thoracic fluid is a primary indicator of worsening heart failure and will often result in patient hospitalization. The OptiVol Fluid Status Monitoring diagnostic feature allows physicians earlier access to warning signs of deteriorating heart failure, which can then be used for early treatment of the patient’s
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heart failure. In July 2007, we announced the launch of the Virtuoso family of ICDs in Japan, following launches in the U.S. and Europe in May and June 2006, respectively.
Implantable Cardiac Resynchronization Therapy. Heart failure is a large and growing health problem. It is typically a late manifestation of one or more other cardiovascular diseases, including coronary artery disease, hypertension, cardiomyopathy, and valvular disease. Chronic heart failure occurs when the heart is unable to pump enough blood to sustain adequate circulation in the body’s tissues. Approximately 22 million patients suffer from heart failure globally and an estimated $80 billion is spent each year to manage heart failure patients. Approximately 5.2 million Americans suffer from heart failure and more than 550,000 new cases are estimated to develop each year. Heart failure is the most costly cardiovascular disease in the U.S., with an estimated $40 billion spent on managing heart failure patients each year. Further, there are more than one million hospitalizations in the U.S. annually with a primary diagnosis of heart failure.
Since 1997, Medtronic has supported more than 20 randomized, controlled clinical studies evaluating device therapy in more than 8,000 heart failure and post-myocardial infarction patients. This research has resulted in several medical “firsts,” among them the first U.S. Food and Drug Administration (FDA) approved resynchronization device for the treatment of heart failure, which was based on results from the groundbreaking MIRACLE trial; the first study of the risk of sudden cardiac death in a heart failure patient population with SCD-HeFT; and the landmark CARE-HF trial, which demonstrated that patients with moderate and severe heart failure who received a Medtronic CRT device experienced a significant reduction in risk in mortality and morbidity, and that long-term treatment with a CRT-pacing (CRT-P) device or CRT-defibrillator (CRT-D) device is a cost-effective way to improve survival in patients with heart failure. In the fall of 2007, data from IMPROVE HF was presented at the scientific sessions of the Heart Failure Society of America Annual Scientific Meeting and the American Heart Association. This is the largest study of U.S.-based heart failure patients in the outpatient setting and is being sponsored by Medtronic. Data demonstrated significant underutilization of many guideline-indicated life-saving medical and device therapies provided to heart failure patients, particularly for women and the elderly. Based on current medical guidelines, only 39 percent of eligible patients received CRT or CRT-D therapy, and only 51 percent of eligible patients received ICD therapy. This data underscores the challenge and opportunity of the ICD market.
Medtronic continues to offer the industry’s broadest selection of devices and features for the growing number of patients with heart failure who are also considered at high risk of sudden cardiac arrest. The Concerto CRT-D, together with the Virtuoso ICD, are Medtronic’s first cardiac rhythm disease management devices to utilize our proprietary Conexus wireless telemetry, enabling communication remotely between the implanted device and programmers at the time of implant, during follow-up in a clinician’s office, or remotely using a patient home monitor. The Concerto CRT-D/Virtuoso ICD family represents our next step in the delivery of premium implantable devices, which, in addition to MVP and ATP During Charging, include OptiVol Fluid Status Monitoring. Concerto CRT-D also offers Left Ventricular Capture Management (LVCM). LVCM is intended to automatically sense and adjust impulses for stimulation of the heart’s left ventricle. Concerto, along with previously released CRT-D devices (InSync Maximo and InSync Sentry), offer sequential biventricular pacing or “V-to-V” (ventricle to ventricle) timing, a feature that allows physicians to separately adjust the timing of electrical therapy delivered to the heart failure patient’s two ventricles, which can optimize the beating of the heart and enhance the flow of blood throughout the body. These CRT-D devices represent important clinical advances since sudden cardiac arrest occurs in heart failure patients at six to nine times the rate observed in the general population. In July 2007, we announced the commercial launch of the Concerto CRT-D in Japan, following launches in the U.S. and Europe in May and June 2006, respectively.
Diagnostics and Monitoring Approximately 1.5 million people worldwide suffer from unexplained syncope. In almost 10 percent of patients, syncope has a cardiac cause; in 50 percent of patients, a non-cardiac cause; and in 40 percent of patients the cause of syncope is unknown. It is a leading cause of emergency room visits. Syncope is difficult to diagnose as syncopal episodes are often too infrequent and unpredictable for detection with conventional monitoring techniques. Our Reveal DX, which launched in Europe in July 2007 and the U.S. in December 2007, is a device that is placed under the skin and continuously monitors the heart’s electrical activity before, during, and after a syncopal event. With
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the information obtained from the Reveal DX, the physician can understand if the cause of syncope is cardiac related, which may help to appropriately manage the patient’s arrhythmia.
Atrial Fibrillation (AF) is the most common cardiac arrhythmia, experienced by approximately 4 to 5 million people worldwide. Treatment of AF can be difficult as episodes may show no symptoms and therefore go unnoticed by patients. AF can lead to a two to seven times higher risk of stroke and an increased risk of heart failure with its attendant risk of sudden cardiac arrest. Our Reveal XT Insertable Cardiac Monitor, launched in Europe in July 2007, monitors AF patients 24 hours a day, every day for up to three years. There are a variety of ways to treat AF, but prior to the launch of Reveal XT physicians had no means of gathering detailed data over an extended period on the progression of AF and the effect of treatment. Reveal XT gives new insight into patients’ heart rhythms, which may help physicians to evaluate stroke risk and determine appropriate treatment options for their patients.
Patient Management Tools. We have three different patient management tools, CareLink, Paceart, and CardioSight Service. The Medtronic CareLink Network, monitor, and software help physicians and patients better manage chronic cardiovascular disease treated by implantable device therapy. CareLink enables patients to transmit data from their pacemaker, ICD, or CRT-D using a portable monitor that is connected to a standard telephone line. Within minutes, the patient’s physician and nurses can view the data on a secure Internet website. The information, which is comparable to that provided during an in-clinic device follow-up visit, provides the physician with a view of how the device and patient’s heart are operating. The system provides an efficient, safe and convenient way for specialty physicians to remotely monitor the condition of their patients and, if needed, make adjustments to medication or prescribe additional therapy. It also saves patients time by potentially eliminating some in-office visits. For patients implanted with devices featuring Conexus Wireless Telemetry, clinicians can schedule routine follow-ups to occur automatically while the patient sleeps, alleviating compliance issues, and program the device to send a CareAlert notification to physicians wirelessly and automatically, providing the potential for treatment decisions before the condition worsens. The information in the Medtronic CareLink Network, which can be forwarded automatically to Paceart, provides access to detailed patient and device data for clinicians from a myriad of sources including in-clinic device interrogations, for inclusion in the patient’s Paceart record; from Paceart, via HL7 industry standard protocols, the data can move seamlessly to the hospital or clinic’s electronic health record system. Today, the Medtronic CareLink Network is being utilized in more than 2,400 clinics and hospitals, and more than 250,000 patients are being monitored. In June 2007, CareLink was launched in Europe, and is now currently available in the U.S., Canada, and Western Europe, and is being piloted in other parts of the world including Japan and Australia.
For more than 20 years, the Paceart System has led in the development of information solutions for device clinic management, including activities such as automating patient scheduling, correspondence and reporting. Paceart supports a common workflow by organizing and archiving data for cardiac devices from all major device manufacturers, serving as the central hub for patients’ device data. In addition to automatically downloading data from the Medtronic CareLink Network, Paceart can automatically receive data from the Medtronic 2090 Programmer, using SessionSync technology. Paceart acts as the gateway for managing clinics’ device data, receiving registration and scheduling data from, and sending patient and device data to more than 15 of the leading electronic health record and practice management systems. Paceart can interface with any HL7-compatible system and is actively sharing data with such industry leaders as athenahealth, EPIC, GEMMS, and NextGen Healthcare, among others. Today, more than 1,100 clinics are using the Paceart System to streamline clinicians’ daily activities and better serve 1.5 million patients.
The third patient management tool we offer is called CardioSight Service, which is an in-clinic data access tool available to physicians treating heart failure patients who have one of several Medtronic CRT-D or ICD devices. CardioSight provides clinically valuable, device-derived information to help specialty physicians discern the status of the heart failure patient’s symptoms. The CardioSight Reader gives insight into a patient’s condition without using a device programmer. Within minutes of downloading device information using the reader, a Heart Failure Management Report or Cardiac Compass Trends Report is available to the clinic and can be added to the patient chart before the physician consults with the patient.
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Customers and Competitors
The primary medical specialists who use our implanted cardiac rhythm devices include electrophysiologists, implanting cardiologists, heart failure specialists, and cardiovascular surgeons. We hold the leading market position among implantable cardiac rhythm device manufacturers. Our primary competitors in the CRDM business are Boston Scientific Corporation and St. Jude Medical, Inc.
Spinal
Our Spinal business is a leading supplier for innovative medical devices and implants used in the treatment of the spine. Today we offer a wide range of products and therapies to treat a variety of conditions of the spine.
Conditions Treated
Our Spinal business offers products for treatment and diagnosis of many spinal conditions, including those listed below.
| • | Herniated Disc – A disc herniation occurs when the inner core of the intervertebral disc bulges out through the outer layer of ligaments that surround the disc. This tear in the outer layer of ligaments causes pain in the back at the point of herniation. If the protruding disc presses on a spinal nerve, the pain may spread to the area of the body that is served by that nerve. The terms “ruptured,” “slipped,” and “bulging” are also commonly used to describe this condition. | |
| • | Degenerative Disc Disease – As part of the natural aging process, intervertebral discs lose their flexibility and shock absorbing characteristics. The ligaments that surround the discs become brittle and easier to tear. At the same time, the inner core of the disc starts to dry out and shrink. Over time, these changes can cause the discs to lose their normal structure and/or function. | |
| • | Spinal Deformity – When viewed from behind, the human spine appears straight and symmetrical. When viewed from the side, however, the spine is curved. Some curvature in the neck, upper trunk, and lower trunk is normal. These curves help the upper body maintain proper balance and alignment over the pelvis. The term deformity is used to describe any variation in this natural shape. One form of spinal deformity, scoliosis, involves a lateral, or side-to-side, curvature of the spine. The vertebrae rotate along with the spine as a consequence of a scoliotic curve. Depending on the severity of the curve, a scoliotic spine may create asymmetries in the shoulders, thoracic spine, and pelvis, leading to an imbalance of the trunk and significant disfigurement. | |
| • | Spinal Tumors – Tumors or cancers of the spine and spinal cord are relatively rare. Three types of tumors affect the spine and spinal cord: primary benign tumors, primary malignant tumors, and metastatic tumors. The term primary is used to designate a tumor originating from actual spine cells. Secondary spinal tumors, or cancers, which are more commonly called metastases, spread from other organs in the body. | |
| • | Trauma/Fracture – Trauma to the spine refers to injury that has occurred to bony elements, soft tissues, and/or neurological structures. Stability to the spinal column can be compromised when bony elements are injured or there is disruption to soft tissues such as ligaments. Instability causes the back to become unable to successfully carry normal loads, which can lead to permanent deformity, severe pain, and, in some cases, catastrophic neurological injuries. Most often the instability comes from a fracture in one of the bony parts of the vertebra. Osteoporosis, a condition characterized by loss of bone mass and structural deterioration of bone tissue, can lead to bone fragility and an increased susceptibility to fracture. | |
| • | Stenosis – A condition caused by a gradual narrowing of the spinal canal, stenosis results from degeneration of both the facet joints and the intervertebral discs. Bone spurs, called osteophytes, which develop because of the excessive load on the intervertebral disc, grow into the spinal canal. The facet joints also enlarge as they become arthritic, which contributes to a decrease in the space available for the nerve roots. |
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The charts below set forth net sales of our Spinal products as a percentage of our total net sales for each of the last three fiscal years:
Our Spinal products, include thoracolumbar, cervical and interbody devices that are employed utilizing the most modern surgical techniques, including the latest Minimal Access Spinal Technologies (MAST) along with bone growth substitutes, and devices for vertebral compression fractures and spinal stenosis.
Spinal Instrumentation. Each year approximately 25 million Americans experience back pain that is severe enough to visit a healthcare professional. Of the approximately 25 million Americans, 13 million endure a significant impairment of activity. We are committed to providing spinal surgeons with the most advanced options for treating low back pain and other spinal conditions.
Today we offer one of the industry’s broadest lines of devices, including a wide range of sophisticated internal spinal stabilization devices, instruments, and biomaterials used in the treatment of spinal conditions. Spinal fusions, which are currently one of the most common types of spine surgery, join two or more vertebrae to eliminate pain caused by movement of the unstable vertebrae. Our Spinal products are used in spinal fusion of both the thoracolumbar region, referring to the mid to lower vertebrae, as well as of the cervical region, or upper spine and neck vertebrae. Products used to treat spinal conditions include rods, pedicle screws, hooks, plates, and interbody devices, such as cages, as well as biologic products, which include bone growth substitutes, dowels and wedges.
In October 2007, we launched the CD HORIZON LEGACY Anterior Spinal System. The newest member of the CD HORIZON family offers an anterior (frontal) fixation solution for complex spinal surgery. The fixation system is designed to assist with stability of the thoracic and lumbar spine when performing modern spinal fusion surgery and may also help patients suffering from degenerative disc disease, trauma, tumors, severe curvatures and other degenerative diseases of the spine. The system features titanium construction, low profile screw design, top loading, top tightening screws, and color coding to make the procedure easier.
Dynamic Stabilization. In July 2007, we launched the PRESTIGE Cervical Disc, the first artificial disc commercially available in the U.S. for use in the neck. The PRESTIGE Cervical Disc gives some patients who are suffering from degenerative disc disease that can cause intolerable neck and/or arm pain the potential for motion at the treated level of the spine as well as another option for pain relief and restored function. With its patented ball-and-trough design, the PRESTIGE Cervical Disc is designed to maintain motion and flexibility while replacing a diseased disc that is removed during surgery. In July 2007, the Company also announced that the BRYAN Cervical Disc received a recommendation for approval from the U.S. FDA’s Orthopedic and Rehabilitation Devices advisory panel. The BRYAN Cervical Disc, composed of a polyurethane nucleus surrounded by titanium endplates, is designed to replicate normal, physiologic motion of the cervical spine.
In addition to the PRESTIGE and BRYAN Cervical Discs we have two additional disc replacement programs currently under investigation in the U.S.: the MAVERICK Artificial Disc for the lumbar spine; and the PRESTIGE LP, our next generation lower profile cervical disc, made of unique ceramic titanium composite.
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Minimal Access Spinal Technologies. We have developed a series of MAST that facilitate safe, reproducible access to the spine with minimal disruption of vital muscles and complementary structures. These techniques involve the use of advanced navigation and instrumentation to allow surgeons to operate with smaller incisions and less tissue damage than traditional surgeries, thus reducing pain and blood loss and improving recovery periods.
Our expanding portfolio of minimally invasive spinal technologies includes the CD HORIZON SEXTANT II System, a next-generation METRx System, to treat herniated discs and allow minimally invasive access for fusion and the MAST QUADRANT Retractor System a retractor that allows access to complex degenerative pathology.
Biologics. Our INFUSE Bone Graft, used in spinal fusion, contains a recombinant human bone morphogenetic protein, or rhBMP-2, that induces the body to grow its own bone, eliminating the need for a painful second surgery to harvest bone from elsewhere in the body. In Europe, INFUSE Bone Graft is marketed as InductOs Bone Graft for spinal fusion. We also offer INFUSE Bone Graft for the treatment of certain types of acute, open fractures of the tibial shaft, a long bone in the lower leg, as well as certain oral maxillofacial indications.
In September 2006, we co-launched the MASTERGRAFT MATRIX and MASTERGRAFT PUTTY synthetic bone graft products, which were developed to provide surgeons with a comprehensive solution. Embedded with MASTERGRAFT GRANULES, both grafts are osteoconductive, malleable, and designed to fill gaps in the skeletal system. These new grafts give surgeons more handling options, while providing an osteoconductive implant that localizes biologic components. These grafts are designed to aid cellular proliferation and osteointegration during the bone healing process. MASTERGRAFT MATRIX is a compressive-resistant collagen scaffold block that is designed to facilitate uninterrupted bone growth. MASTERGRAFT PUTTY is a malleable collagen scaffold that may be used with bone marrow aspirate or sterile water. When the hydrated graft is combined with local bone, it may provide more suitable handling characteristics for the surgical procedure. In May 2007, we announced the immediate, nationwide availability of PROGENIX DBM, a bone graft substitute and bone void filler used in voids or gaps of the pelvis, ilium, and extremities.
Late in April 2007, we began to market INFUSE Bone Graft for certain oral maxillofacial and dental regenerative bone grafting procedures. It is estimated that more than 350,000 bone grafting procedures of this type are performed in the U.S. each year. Medtronic has also submitted a pre-market approval (PMA) with the FDA for a posterolateral spinal indication for INFUSE Bone Graft.
Kyphon. During the third quarter of fiscal year 2008, we consummated the acquisition of Kyphon Inc. (Kyphon), a public company, and it became our wholly owned subsidiary. Kyphon develops and markets medical devices designed to restore and preserve spinal function using minimally invasive technology. Kyphon’s primary products are used in balloon kyphoplasty for the treatment of spinal compression fractures caused by osteoporosis, trauma or cancer, and in the interspinous process decompression (IPD) procedure for treating the symptoms of lumbar spinal stenosis (LSS). In the U.S., Kyphon’s X-STOP IPD Device provides us with the first FDA-approved minimally invasive device for the treatment of mild to moderate LSS patients. In Europe, both the X-STOP and the next generation Aperius PercLID device are available for the treatment of LSS.
It is expected that the acquisition of Kyphon will add to the growth of our existing Spinal business by extending its product offerings into some of the fastest growing product segments of the spine market, enabling us to provide physicians with a broader range of therapies for use at all stages of the care continuum.
Customers and Competitors
The primary medical specialists who use our Spinal products are spinal surgeons, orthopedic surgeons, neurosurgeons, and interventional radiologists. Our competitors in the Spinal business include Zimmer, Inc., Johnson & Johnson, Stryker Corporation, Synthes-Stratec, Inc., and over 200 small physician owned companies.
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CardioVascular
Our CardioVascular business offers a full line of minimally invasive products and therapies to treat coronary artery disease, abdominal and thoracic aortic aneurysms, peripheral vascular disease, and heart valve disorders.
Conditions Treated
Our CardioVascular business offers minimally invasive products for the treatment of the following conditions.
| • | Coronary artery disease — deposits of cholesterol and other fatty materials (plaque) on the walls of the heart’s arteries, causing narrowing or blockage of the vessel and reducing the blood supply to the heart. Blockage in a coronary artery can prevent the heart from receiving sufficient oxygen, which can impair heart function, potentially resulting in a heart attack. | |
| • | Peripheral vascular disease — narrowing or blockage of arteries outside the heart, impeding blood supply to the brain, legs, and other vital organs. | |
| • | Abdominal and Thoracic aortic aneurysm (AAA/TAA) — an aneurysm is a dangerous bulge or weakening of the body’s main artery that can rupture with fatal consequences if left untreated. | |
| • | Heart valve disorders — diseased or damaged heart valves can restrict blood flow or leak, which limits the heart’s ability to pump blood, causing the heart to work harder to meet the needs of the circulatory system. |
The charts below set forth net sales of our CardioVascular business as a percentage of our total net sales for each of the last three fiscal years:
Our CardioVascular products include coronary and peripheral stents and related delivery systems, endovascular stent graft systems, distal embolic protection systems, perfusion systems which oxygenate and circulate a patient’s blood during arrested heart revascularization surgery, positioning and stabilization systems for beating heart revascularization surgery, products for the repair and replacement of heart valves, surgical ablation products, and a broad line of balloon angioplasty catheters, guide catheters, guidewires, diagnostic catheters and accessories.
Coronary and Peripheral Stents. If a blockage in a coronary artery prevents the heart from receiving sufficient oxygen, the heart cannot function properly and a heart attack may result. Coronary artery disease is commonly treated with balloon angioplasty, a procedure in which a special balloon is threaded through the coronary artery system to the site of the arterial blockage, where it is inflated, pressing the obstructive plaque against the wall of the vessel to improve blood flow.
Following balloon angioplasty, physicians often place coronary stents at the blockage site to prop open diseased arteries to maintain blood flow to the heart. Stents are cylindrical, wire-mesh devices small enough to insert into coronary arteries. Our leading Driver bare metal stent system is composed of an advanced cobalt-based alloy, which surpasses the limitations of stainless steel by creating very strong, ultra-thin struts that offer excellent flexibility and vessel support. The Driver stent is available in
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all major markets worldwide. The Micro-Driver coronary stent system, approved in the U.S. and Japan in 2006, is now also available in all major markets. The Micro-Driver is a bare metal stent system designed specifically to perform in small vessels and tortuous anatomies. This cobalt-alloy stent is the first bare metal stent for small vessels with an indication for new or untreated vessels (a de novo indication), addressing an important need in the treatment of coronary artery disease.
Drug-Eluting Stents. Drug-eluting stents (DES) are designed to inhibit the re-narrowing or re-clogging of arteries, known as restenosis, that can occur after percutaneous coronary intervention (PCI). Our Endeavor DES (Endeavor) drug-eluting coronary stent combines an innovative delivery system leveraging our discrete technology, our advanced Driver cobalt alloy stent, Zotarolimus (a sirolimus analogue), and a biomimetic polymer coating that controls the release of the drug into the vessel wall. In May 2002, we entered into a ten-year agreement with Abbott Laboratories (Abbott) granting us co-exclusive use of Abbott’s proprietary immunosuppressant drug Zotarolimus, as well as the phosphorylcholine coating Abbott has licensed from Biocompatibles International PLC for use in conjunction with Zotarolimus. Clinical and preclinical studies have shown that this proprietary biocompatible polymer, which mimics the outer membrane of a red blood cell, is safe and thrombo-resistant.
Worldwide, Medtronic has approximately 16,000 Endeavor patients enrolled in its multiple clinical trials, and the growing volume of positive data and number of patients with long-term follow-up continues to reinforce the stent’s favorable safety and efficacy profile. Ultimately, the ENDEAVOR clinical program will enroll more than 22,500 patients followed to five years; approximately 16,630 of these patients will receive an Endeavor stent.
Our Endeavor program achieved a number of significant regulatory and clinical milestones during fiscal year 2008. In July 2007 we announced that the ENDEAVOR IV clinical trial had met its primary, non-inferiority endpoint of Target Vessel Failure at nine months compared to the TAXUS Paclitaxel-Eluting Coronary Stent System from Boston Scientific Corporation. These results were included in the Endeavor Pre-Market Approval application for FDA approval.
In October 2007 we announced the CE Mark approval and the international launch of Endeavor Resolute DES (Endeavor Resolute). Endeavor Resolute is a next-generation DES with Biolinx, a proprietary biocompatible polymer that is designed to address the special needs of patients who have complex medical conditions, and is engineered to match the duration of drug delivery with the longer healing duration often required by these patients. Since approval, Endeavor Resolute has been launched in more than 100 countries in Europe, Asia, the Middle East and Africa – making Medtronic the first company to offer two internally developed DES options for the treatment of coronary artery disease.
In November 2007 we received CE Mark approval for the Sprinter Legend Semicompliant Rapid Exchange Balloon Dilatation Catheter for use in coronary angioplasty procedures. The Sprinter Legend provides the latest innovations in balloon technology, including the unique 1.25 mm Zerofold balloon, and is designed to address the most technically difficult lesions in coronary angioplasty procedures.
On February 1, 2008 we announced FDA approval and the initiation of the U.S. launch of the Endeavor. Based on the most comprehensive body of scientific evidence submitted to the FDA for a DES, the approval gives U.S. cardiologists access to a new medical device for safely and effectively treating patients with narrowed coronary arteries. Endeavor is the first new DES approved by the FDA since 2004. As a condition of FDA approval, we agreed to continue our extensive post-market clinical program, and we will now add sites in the U.S. to ensure that at least 5,000 patients are followed to a minimum of five years. With the U.S. launch, Endeavor is now available in all major global markets except for Japan.
Also in February 2008, we announced the first human use of our investigational bifurcation stent. The new stent employs an innovative Y-shaped design to match the anatomy of lesions that form at the junctions of coronary arteries. The implant marked the first patient enrollment in the BRANCH study, a trial designed to assess the safety and deliverability of the Medtronic bifurcation stent, which differs from other approaches by providing scaffolding to both branches of the bifurcation simultaneously without overlapping stents. The prospective, single-arm trial will enroll up to 60 patients at five sites in Australia and New Zealand. Of the approximately two million percutaneous coronary interventions
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performed each year worldwide, an estimated 450,000 involve patients with bifurcation lesions, which are consistently recognized as one of the most difficult lesion types to treat and are associated with higher adverse event rates.
In March 2008 at the American College of Cardiology annual meeting, we presented a pooled analysis of safety data from the ENDEAVOR clinical program that affirmed the superior long-term safety of the Endeavor drug-eluting coronary stent compared to the Driver bare metal stent. The analysis illustrated that Endeavor, when compared to Driver, was associated with low rates of all evaluated safety metrics.
Endovascular Stent Grafts. Our CardioVascular product line also includes a range of endovascular stent grafts including the market-leading AneuRx and Talent Stent Grafts for minimally invasive AAA repair and the Talent Thoracic and Valiant Thoracic Stent Grafts for TAA repair. Present in an estimated 1.2 million people and responsible for approximately 15,000 annual deaths in the U.S., an AAA is a dangerous bulge or weakening of the body’s main artery that can rupture with fatal consequences if left untreated. This is compared to over 60,000 people in the U.S. with a thoracic aortic aneurysm. Medtronic now has more than 10 years of clinical experience with its endograft implants, by far the most clinical experience in the endovascular industry. More than 130,000 patients have been treated worldwide with Medtronic stent grafts for AAA or TAA aneurysms.
Abdominal Aortic Aneurysm (AAA) Repair
Our AneuRx AAAdvantage Stent Graft System is available in the U.S. and the Talent Abdominal Stent Graft System is now approved worldwide with the exception of Japan. In March 2006, we announced FDA approval of our AneuRx AAAdvantage stent graft with the Xcelerant delivery system. Enhancements to the AAAdvantage Stent Graft System include contoured stents, broader proximal and distal sealing, and improved radiopaque markers. In January 2008, we announced the U.S. market launch of the AneuRx AAAdvantage Stent Graft on the Xcelerant Hydro Delivery System, which features a hydrophilic coating designed to aid navigation of the device through tight and tortuous arteries by reducing friction with the artery wall. In March 2008, we announced the European market launch of the Talent Abdominal Stent Graft on this same Xcelerant Hydro Delivery System. In addition, we anticipate continued sales growth outside the U.S. with future acceptance of our next generation Endurant AAA Stent Graft. We anticipate completion of our first-in-human trial and CE mark approval for the Endurant AAA Stent Graft in Western Europe in the second half of calendar year 2008. The Endurant AAA Stent Graft System’s precise deployment, flexibility, and low delivery profile are designed for patients with challenging aneurysm anatomies.
The Talent Abdominal Stent Graft with the CoilTrac Delivery System PMA was approved by the FDA in April 2008 and the U.S. launch occurred in June 2008. The Talent Abdominal Stent Graft System is specifically indicated for endovascular repair (EVAR) of abdominal aortic and aorto-iliac aneurysms. It expands the indication for EVAR with a proximal aortic neck length requirement of 10 mm or greater and a proximal aortic neck angulation of 60 degrees or less. The stent graft is available in diameters of up to 36 mm, as well as flared and tapered iliac limbs of 8 mm to 24 mm. This indication enables physicians to treat a broader range of patients than with other abdominal stent graft systems available in the U.S. The U.S. PMA clinical data is consistent with Talent Abdominal’s international experience, where it is a leading stent graft with more than 45,000 implants to date.
Thoracic Aortic Aneurysm (TAA) Repair
In July 2005, we announced the international commercial release of the Valiant Thoracic Stent Graft with the Xcelerant Delivery System, a next-generation stent graft. The Xcelerant Delivery System is designed to provide physicians with a smooth, controlled and more trackable delivery platform.
The Talent Thoracic Stent Graft with the CoilTrac Delivery System PMA was filed with the FDA in July 2007 and we received FDA approval of our Talent Thoracic device in June 2008. We anticipate the launch of the Talent Thoracic Stent Graft in the second half of calendar year 2008. The Talent Thoracic Stent Graft System may expand the indication for thoracic stent grafting by as much as 25% due to the introduction of smaller and larger diameter stent grafts. The Talent Thoracic Stent Graft System is available in Europe and the rest of the world, excluding Japan.
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In addition, we anticipate launching the next generation Valiant Thoracic Stent Graft System with Xcelerant Hydro Delivery System and incorporated tip capture in Europe at the end of calendar year 2008. This delivery system combines the reduced friction of the hydrophilic coating with a tip capture mechanism designed for precise and controlled deployment of the stent graft.
Coronary Artery Bypass Surgery. When physicians determine that they cannot effectively treat a blockage in a coronary artery using balloon angioplasty or a stent, they typically turn to cardiac surgery to address the problem. The most common surgical procedure used to treat blockage in a coronary artery is a Coronary Artery Bypass Graft (CABG). In a CABG procedure, surgeons re-route the blood flow around the blockage by attaching a graft, usually from an artery or vein from another part of the patient’s body, as an alternative pathway to the heart. There are two primary techniques, arrested heart surgery and beating heart surgery.
Arrested Heart Surgery. In a conventional coronary artery bypass procedure (as well as heart valve surgery), the patient’s heart is temporarily stopped, or arrested. The patient is placed on a circulatory support system that temporarily replaces the patient’s heart and lungs and provides blood flow to the body. We offer a complete line of blood-handling products that form this circulatory support system and maintain and monitor blood circulation and coagulation status, oxygen supply, and body temperature during arrested heart surgery.
Beating Heart Surgery. As an alternative to conventional arrested heart bypass surgery, physicians are performing coronary artery bypass surgery on the beating heart to avoid the complexity and potential risks of arresting the heart. To assist physicians performing beating heart surgery, we offer positioning and stabilization technologies. These technologies include our Starfish 2 and Urchin heart positioners, which use suction technology to gently lift and position the beating heart to expose arteries on any of its surfaces. These heart positioners are designed to work in concert with our Octopus tissue stabilizer, which holds a small area of the cardiac surface tissue nearly stationary while the surgeon is suturing the bypass grafts to the arteries. In June 2006, we introduced the Octopus Evolution tissue stabilizer, the latest in a 10-year series of innovative cardiac surgery instruments. It is currently estimated that beating heart surgeries make up approximately 20 percent of the estimated 270,000 coronary artery bypass surgeries that are performed in the U.S. each year.
Surgical Ablation. Our Cardioblate surgical ablation systems (CSAS), which includes the Cardioblate LP Surgical Ablation System and Cardioblate Navigator Tissue Dissector, allow cardiac surgeons to create ablation lines during cardiac surgery. In November 2006, we announced FDA approval to initiate the Feasibility of the Lone Atrial Fibrillation Clincial Trial, (FACT), to evaluate the use of the CSAS thorascopically in paroxysmal AF patients. In March 2007, we announced initiation of the Concomitant Utilization of RadioFrequency Energy for Atrial Fibrillation (CURE-AF) study, a U.S. pivotal trial to evaluate the CSAS to treat permanent AF. The purpose of CURE-AF is to evaluate the safety and effectiveness of our CSAS at reestablishing the normal heart rhythm in patients with permanent AF requiring concomitant open heart surgery utilizing the modified Cox Maze III procedure. This prospective, non-randomized, clinical trial will enroll 75 patients at 10 U.S. medical centers. The primary endpoints of the trial are to evaluate the freedom from permanent AF in patients off antiarrhythmic drugs at six months and the composite major adverse event rate at one month. The results of the trial will be submitted to the FDA to support an indication for the Medtronic CSAS in the treatment of permanent AF in patients requiring concomitant open heart surgery.
Heart Valves. We offer a complete line of surgical valve replacement and repair products for damaged or diseased heart valves. Our replacement products include both tissue and mechanical valves. The valve market continues to shift from mechanical to tissue valves, which is beneficial to us due to our broad selection of tissue valve products. Our Mosaic bioprosthetic heart valve is a reduced-profile valve engineered from porcine tissue incorporating a proven flexible stent. The low profile and flexibility of the stent offer benefits to the surgeon when implanting the valve. Other tissue product offerings include the Freestyle stentless and Hancock II stented valves. Our mechanical heart valve offerings include the Medtronic Hall, the ADVANTAGE and the ADVANTAGE Supra bileaflet valves. Currently, the standard ADVANTAGE aortic bileaflet valve is under evaluation by the FDA in the U.S. Our valve repair products include the Duran Flexible and CG Future Band and CG Composite Annuloplasty
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Systems. In January 2008 we announced the formation of an exclusive global licensing agreement with Arbor Surgical Technologies, Inc. under which Medtronic will manufacture, market and distribute Arbor’s bovine pericardial tissue heart valve technologies. In addition, we acquired a minority interest in Arbor. The technology will complement our Structural Heart Disease therapy objectives, which are focused on developing effective options for valve disease, septal defects and atrial fibrillation.
In October 2006, Medtronic’s Melody Transcatheter Pulmonary Valve and Ensemble Transcatheter Delivery System received European CE Mark making it the first transcatheter valve in the world to receive such an approval. The system is the first of its kind to treat patients with congenital structural heart disease requiring pulmonary heart valve replacement. According to the American Heart Association, congenital heart defects are the No. 1 birth defect worldwide. In the U.S. alone, more than 25,000 babies are born each year with a congenital heart defect. Approximately 22 percent of these babies have defects disrupting the blood flow from the right ventricle to the pulmonary artery. A feasibility study to evaluate the use of the Medtronic Melody Transcatheter Pulmonary Valve and Ensemble Transcatheter Delivery System in the U.S. was initiated in February 2007, and enrollment was completed in September 2007.
Transcatheter valve technology represents a less invasive means to treat heart valve disease and is designed to allow physicians to deliver replacement valves via a catheter through the body’s cardiovascular system, thus eliminating the need to open the chest. Traditionally, open heart surgery has been required to correct the problem and it is not unusual for a patient to undergo multiple, open-heart surgeries during their lifetime. The Melody Valve and Ensemble System provide a non-surgical means to restore effective pulmonary valve function and prolong the functional life of prosthetic conduits, thereby reducing the number of open heart surgeries for these patients throughout their lifetime.
Customers and Competitors
The primary medical specialists who use our catheter-based products for treating coronary artery disease are interventional cardiologists, while products treating peripheral vascular disease and aortic aneurysms may be used by interventional radiologists, vascular surgeons, cardiac surgeons and interventional cardiologists. Our primary competitors in the coronary and peripheral vascular business are Boston Scientific Corporation, Johnson & Johnson, and Abbott Laboratories, Inc. Our primary competitors in the endovascular business are Cook, Inc. and W. L. Gore & Associates, Inc. The principal medical specialists who use our cardiac surgery products are cardiac surgeons. Our primary competitors in the structural heart disease business are Edwards LifeSciences Corporation, Boston Scientific Corporation, Johnson & Johnson, St. Jude Medical, Inc., Terumo Medical Corporation, and Sorin S.p.A.
Neuromodulation
Our Neuromodulation business develops, manufactures, and markets devices for the treatment of neurological, urological, and gastroenterological disorders. We are the pioneer in the field of restorative neuroscience, using site-specific neurostimulation and targeted drug delivery to modulate and restore nervous system function. Through collaborative efforts with our customers we have developed a unique portfolio of therapeutic technologies for the treatment of debilitating chronic diseases that represent large, unmet medical needs.
Conditions Treated
Our Neuromodulation business offers products for the treatment or diagnosis of the conditions described below.
| • | Pain Management — including neurostimulation and implantable drug delivery systems for chronic pain. | |
| • | Movement Disorders — including deep brain stimulation for Parkinson’s disease, essential tremor, dystonia, and intrathecal baclofen (ITB) therapy for spasticity. | |
| • | Urological and gastroenterological disorders — including neurostimulation for overactive bladder and urinary incontinence, radio frequency ablation for benign prostatic hyperplasia (BPH |
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| or enlarged prostate), neurostimulation for gastroparesis, and a ph monitoring system used to diagnose gastroesophageal reflux disease (GERD). |
The charts below set forth net sales of our Neuromodulation products as a percentage of our total net sales for each of the last three fiscal years:
Neuromodulation products consist of therapeutic and diagnostic devices, including implantable spinal cord stimulation systems and implantable drug delivery devices, used to treat intractable chronic pain; deep brain stimulation systems and implantable drug administration devices to treat movement disorders like Parkinson’s disease and implantable intrathecal drug delivery for intractable spasticity; and sacral nerve stimulation systems to treat overactive bladder and urinary incontinence. Our product portfolio also includes products for the treatment of BPH, or enlarged prostate and gastroparesis and a pH monitoring system for diagnosing GERD. Many of these are large, underpenetrated markets. Chronic pain affects an estimated 75 million people in the U.S. alone. Overactive bladder affects 33 million people in the U.S. alone.
Pain Management – Implantable Neurostimulation Systems. We offer the largest portfolio of neurostimulation systems, including rechargeable and non-rechargeable devices, along with the largest selection of leads. In February 2008, we announced the worldwide launch of RestoreULTRA neurostimulation systems for the treatment of chronic pain. This rechargeable neurostimulator, the most advanced device in our market-leading family of RESTORE devices, is the smallest and thinnest 16-electrode rechargeable neurostimulator available. Furthermore, for the first time with any neurostimulator, the patient programmer includes an innovative new feature called TARGETmyStim. This feature allows patients to make appropriate and immediate adjustments in their stimulation in order to best address normal fluctuations in pain, including changing pain patterns. By using the remote control programmer, patients can fine-tune their stimulation to specific sites up and down the spinal cord and increase/decrease the intensity of the electrical impulses. These adjustments allow the patient to customize their pain therapy in a way that was previously only possible with a physician programmer during an office visit. The RestoreULTRA neurostimulator allows patients who use medium stimulation settings to go at least two weeks before needing to recharge.
Our portfolio of neurostimulators also includes RestoreADVANCED (rechargeable) and PrimeADVANCED (non-rechargeable) neurostimulation systems. All of the neurostimulation systems are implanted under the skin and have up to two leads with eight electrodes each that deliver electrical pulses to the spinal cord. Based on individual patient need, the positioning of the electrodes can be customized to deliver stimulation directly to the target area on the spinal cord, and in doing so, block pain signals from reaching the brain.
In June 2007, we launched worldwide, the Specify 5-6-5 surgical lead for neurostimulation therapy, designed to improve its effect on low back pain. The Specify 5-6-5 surgical lead features 16 electrodes arrayed in three columns on a durable, flexible, curved paddle that conforms to the anatomy of the epidural space. The electrodes are arranged in a diamond pattern that is intended to maximize therapeutic effectiveness while minimizing energy consumption. Each electrode can be activated and programmed independently, which enables customization and adjustment of neurostimulation therapy based on individual patient needs. This lead is the first of its class to use a tripolar design.
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A continuing major initiative in fiscal year 2008 was the establishment of higher levels of evidence for our therapies’ efficacy and cost-effectiveness. In September 2007, the international medical journal PAIN published results from a study known as PROCESS showing that Medtronic neurostimulation therapy plus conventional medical management provided patients with significantly greater pain relief, quality of life, functional capacity and treatment satisfaction than conventional medical management alone after six months. Forty-eight percent of the patients assigned to receive neurostimulation plus conventional treatments experienced a 50 percent or greater improvement in leg pain compared to 9 percent of patients assigned to receive only conventional treatments (p<0.001). PROCESS is the largest multi-center randomized controlled trial of neurostimulation therapy ever conducted. The study design randomly assigned 100 patients from 12 academic medical centers in Australia, Belgium, Canada, Israel, Italy, Spain, Switzerland, and the United Kingdom to receive conventional medical management or Medtronic neurostimulation therapy for a period of six months and includes long-term follow-up to 24 months.
Pain Management – Implantable Drug Delivery Systems. Our portfolio of intrathecal drug delivery systems consist of the only programmable, implantable drug pump and catheter that deliver small quantities of drug directly into the intrathecal space in the spine. These devices are used to treat chronic, intractable pain.
Movement Disorders – Deep Brain Stimulation (DBS). For patients suffering from movement disorders like Parkinson’s disease, essential tremor, or dystonia, our line of Activa DBS Therapy systems offer a solution. DBS therapy uses an implantable medical device akin to a cardiac pacemaker to deliver carefully controlled electrical pulses to precisely targeted areas of the brain involved in motor control. Continuous stimulation of these areas blocks the signals that cause the disabling motor symptoms of the disease.
The establishment of higher levels of evidence for our DBS therapies’ efficacy and cost-effectiveness is a major step in their continued adoption. In August 2006, the New England Journal of Medicine published results from a major randomized controlled multi-center study showing that Activa DBS Therapy combined with medication is significantly more effective than medication alone in treating motor symptoms of advanced Parkinson’s disease. Conducted at 10 academic medical centers in Germany and Austria, the study included 156 patients with severe motor symptoms of Parkinson’s disease. Compared to medication alone, DBS of the subthalamic nucleus, a brain structure involved in regulating movement, caused significantly greater improvements in motor function after six months of treatment. On average, patients who received DBS plus medication showed a 41 percent improvement in motor function. In November 2006, research published in the New England Journal of Medicine showed DBS can provide significant and sustainable benefits to people with disabling forms of dystonia, a neurological movement disorder that forces parts of the body into abnormal, sometimes painful, movements or postures. Three months after randomization, patients in the neurostimulation group experienced a 39 percent improvement in the movement score of the Burke-Fahn-Marsden Dystonia Rating Scale, compared to a 5 percent improvement in the control group. Similarly, neurostimulation patients recorded a 38 percent reduction in disability scores, compared to an 8 percent reduction in the control group.
During fiscal year 2008, we also continued to make progress in clinical trials designed to explore new applications of our deep brain stimulation technologies in the treatment of other neurological disorders that affect hundreds of thousands of patients. In the first quarter of fiscal year 2008, we completed the implants for the SANTE pivotal trial, a study of our deep brain stimulation therapy for the treatment of medically refractory epilepsy, a form of the neurological condition that does not respond to antiepileptic drugs. Epilepsy is a condition that affects more than three million Americans of all ages; about one-third of these people do not respond to current treatment options and continue to experience seizures. The data on the SANTE trial will be available in calendar year 2008.
Additionally, we continue to explore innovative new ways to use DBS therapy for severe and intractable psychiatric disorders such as obsessive-compulsive disorder (OCD) and treatment-resistant depression. As previously announced, we are pursuing a Humanitarian Device Exemption (HDE) for OCD and intend to pursue additional clinical evaluation of the Company’s DBS therapy in the treatment of severe and treatment-resistant depression, a disabling form of the psychiatric disorder affecting millions of people worldwide.
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Movement Disorders – Implantable Drug Delivery Systems. Our portfolio of intrathecal drug delivery systems consists of the only programmable, implantable drug pump and catheter that deliver small quantities of drug directly into the intrathecal space in the spine. In addition to use in the treatment of intractable pain, these devices are used for the management of severe spasticity of cerebral or spinal origin.
Medtronic ITB (Intrathecal Baclofen) Therapy is indicated for the management of severe spasticity of cerebral and spinal origin, including stroke, cerebral palsy, brain injury, spinal cord injury, and multiple sclerosis. It uses our SynchroMed II Implantable Infusion System, which consists of a programmable drug pump connected to a thin tube, or catheter, to deliver precise amounts of a muscle relaxant manufactured by Novartis Corporation under the trade name Lioresal® Intrathecal (baclofen injection) directly to the intrathecal space – the fluid-filled area surrounding the spinal cord, the drug’s site of action. By targeting the spinal cord, ITB Therapy reduces spasticity with smaller amounts of medication than would be required orally. Intrathecal infusion, which bypasses the body’s blood-brain barrier, also minimizes systemic side-effects. By reducing spasticity, ITB Therapy may also improve function, quality of life, and ease of care. To date, the ITB therapy is relatively under penetrated.
In late April 2007, we announced a new study published in an issue of the Journal of Child Neurology indicating that Medtronic ITB therapy for spasticity in children with cerebral palsy improves their quality of life and is cost-effective compared to other established cost-effective treatments. The findings of this Medtronic-sponsored study were aimed to increase access to the treatment.
Urology and Gastroenterology Devices. Our therapeutic and diagnostic products for urology and gastroenterology include the InterStim Therapy for the treatment of overactive bladder and urinary incontinence; Prostiva RF Therapy, which uses low-level radio frequency energy to treat BPH, or enlarged prostate; Enterra Therapy for the treatment of gastroparesis; and the Bravo pH Monitoring System for the evaluation of GERD.
In November 2007, we announced the initiation of the InSite Trial, a post-market study of InterStim Therapy. This study aims to enroll more than 450 patients; those who qualify will be randomized to receive either InterStim Therapy or standard medical treatment, including oral medications as determined by their physician. Patients implanted with InterStim Therapy will be followed out to five years. The results of this trial are expected to provide further clinical evidence of InterStim Therapy’s efficacy in treating patients suffering from overactive bladder versus standard medical therapy.
Customers and Competitors
The primary medical specialists who use our Pain Management and Movement Disorders products are neurosurgeons, neurologists, pain management specialists, physiatrists, and orthopedic spine surgeons. The primary medical specialists who use our urology and gastroenterology products are urologists, urogynecologists, and gastroenterologists. Our primary competitors for pain management and movement disorders are Boston Scientific Corporation and St. Jude Medical, Inc. Our primary competitors for urology and gastroenterology products are Boston Scientific Corporation, Urologix, Inc., and American Medical Systems, Inc.
Diabetes
Our Diabetes business develops advanced diabetes management solutions. We are the world leader in integrated diabetes management systems, insulin pump therapy, continuous glucose monitoring systems and therapy management software, and are committed to providing improved tools and technologies to help people with diabetes live longer, healthier lives.
Conditions Treated
Our Diabetes business offers solutions for the treatment of diabetes— the inability to control glucose (blood sugar) levels resulting from the body’s failure to produce or properly use insulin.
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The charts below set forth net sales of our Diabetes business as a percentage of our total net sales for each of the last three fiscal years:
Our Diabetes products help patients maintain near-normal glucose control. Diabetes afflicts roughly 250 million people worldwide, and almost 21 million people in the U.S. Currently, our products serve the insulin-dependent population, approximately five million people in the U.S. The key to managing diabetes is to maintain tight control of glucose levels. If not well-managed, diabetes can lead to blindness, kidney failure, amputation, impotence and heart failure. More than $174 billion is spent annually on diabetes and its complications, including $116 billion in direct medical costs.
Integrated Diabetes Management Systems. The MiniMed Paradigm REAL-Time System is the first and only integrated insulin pump and continuous glucose monitoring system. The MiniMed Paradigm REAL-Time System is made up of two components, a REAL-Time Continuous Glucose Monitor (CGM), and a MiniMed Paradigm insulin pump. The system receives glucose readings every five minutes from a glucose sensor worn on the body. This REAL-Time glucose information is displayed on the insulin pump, allowing patients to take immediate action to improve their glucose control after taking a confirmatory fingerstick. The REAL-Time System is indicated for any patient seven years of age or older.
Integrating an insulin pump with REAL-Time CGM is a major step toward the development of a “closed-loop” insulin delivery system that may one day mimic some functions of the human pancreas. Medtronic is testing future systems that would employ advanced scientific algorithms to proactively recommend insulin dosages to patients. Through this process, Medtronic anticipates developing an external, closed-loop system designed to simplify and improve patient diabetes management.
External Insulin Pumps. Our insulin pumps are primarily used by patients with type 1 diabetes, which occurs when the pancreas stops producing insulin. In order to survive, people with type 1 diabetes must administer insulin using injections or an insulin pump. Our therapies are also helpful in managing insulin-dependent type 2 diabetes, which results from the body’s inability to produce enough insulin or properly use the insulin.
Our MiniMed Paradigm insulin pump is currently the leading choice in insulin pump therapy. Worn like a pager, the Paradigm insulin pump calculates complex “diabetes math” and recommends precise insulin dosages to patients helping manage their disease without daily insulin injections. Because MiniMed Paradigm insulin pump therapy delivers precise micro-doses of insulin to the body, it helps diabetes patients keep their glucose levels within a near-normal range, offering both short- and long-term health benefits. The MiniMed Paradigm REAL-Time System is indicated for all patients requiring insulin.
Continuous Glucose Monitors. Our Guardian REAL-Time System is intended to help protect diabetes patients from high and low glucose levels, and to maintain tighter glucose control. Unique features include predictive and rate-of-change alarms as well as expanded trend graphs. In addition to standard high and low glucose alerts, new early warning alerts warn patients before their glucose reaches preset thresholds. The system also includes the MiniLink REAL-Time Transmitter, a rechargeable, waterproof transmitter approximately one-third the size of previous transmitters.
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CareLink Therapy Management Software. Medtronic offers therapy management software solutions to help patients and their healthcare providers optimize their diabetes control and quality of life. These Web-based platforms consist of CareLink Personal software for patients and CareLink Pro software for healthcare providers. It allows patients to quickly and easily upload data from their diabetes management devices to a secure online database. And because the platform is totally integrated, healthcare providers can quickly and easily download patient data remotely in advance of the office visit. Both the patient and healthcare provider can save time to focus on optimizing therapy.
Strategic Partnerships
In August 2007, we announced an exclusive U.S. agreement with LifeScan, Inc., a Johnson & Johnson company, to distribute and co-market new blood glucose meters developed by LifeScan for Medtronic patients. Concurrently, we announced an alliance with a division of Bayer HealthCare LLC, a member of the Bayer Group, to distribute and co-market a new blood glucose meter for Medtronic patients outside the U.S. beginning in Canada and Europe. These new meters will wirelessly transmit blood glucose test results directly to our MiniMed Paradigm insulin pumps and GuardianREAL-Time Systems. Wireless communications make data entry easier and more convenient for patients. As part of the agreement with LifeScan, we are working together to promote awareness of insulin pump therapy, the growth of the insulin pump market and proactive strategies for diabetes management.
Clinical Trials
In order to drive broad acceptance of sensor-augmented insulin pump therapy, we are conducting the Sensor Augmented Therapy for A1C Reduction (STAR) trials, which will evaluate sensor-augmented insulin pump therapy versus traditional insulin pumps and multiple daily injection therapy. The STAR trials are designed to drive therapy acceptance and improved reimbursement for insulin pump and continuous glucose monitoring therapy based on anticipated positive results.
In June 2007, preliminary results for STAR 1 were presented at the American Diabetes Association Scientific Sessions in Chicago, IL. The study did not meet its primary endpoint in A1C reduction; however, the results showed that usage compliance strongly correlated to benefit of therapy.
The STAR 3 trial is designed to compare the efficacy of the Paradigm REAL-Time System versus today’s standard of care, Multiple Daily Injections with frequent fingerstick testing. The trial was designed with input from the findings of STAR 1, and is currently targeting completion of patient enrollment in fiscal year 2009.
Customers and Competitors
The primary medical specialists who use our diabetes products are endocrinologists, diabetologists, and internists. Our most significant competitors for diabetes products are Abbott Laboratories, DexCom, Inc., Insulet Corporation, Johnson & Johnson, Roche Ltd. and Smiths Group PLC.
Surgical Technologies
Our Surgical Technologies business develops, manufactures, and markets products and therapies to treat diseases and conditions of the ear, nose and throat (ENT), and certain neurological disorders. In addition, the segment manufactures and markets image guided surgery systems that facilitate surgical planning during precision cranial, spinal, sinus and orthopedic surgeries. As a market leader in ENT and neurosurgery, we are changing the way ENT surgery is performed with innovative, minimally invasive products and techniques that benefit both patients and surgeons.
Conditions Treated
Our Surgical Technologies products are used in the treatment of the conditions described below.
| • | ENT diseases and disorders, such as chronic sinusitis, chronic otitis media, hearing loss, Ménière’s disease, thyroid diseases, and tumors of the head and neck. | |
| • | Neurological diseases and disorders, including both pediatric and normal pressure hydrocephalus, traumatic brain injury, and spinal conditions. |
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| • | A broad range of cranial, spinal, sinus, and orthopedic maladies through the use of computer-assisted navigation during surgery. |
The charts below set forth net sales of our Surgical Technologies business as a percentage of our total net sales for each of the last three fiscal years:
Our primary Surgical Technologies products include powered tissue-removal systems, high-speed powered surgical drill systems to facilitate surgical access in the spine and cranium, fluid-control products including shunts for pediatric and normal pressure hydrocephalus and systems for the treatment of traumatic brain injury, a full line of cranial fixation devices that include both titanium and resorbable plates and screws, nerve monitoring systems, image-guided surgery systems, and a Ménière’s disease therapy device.
Chronic rhinosinusitis (sinus infections). For the surgical treatment of chronic sinus infections, we offer powered and manual instruments with a variety of blade tips for removing diseased tissue and bone. Our bioresorbable nasal packing and dressings, such as MeroGel Dressing, aid in wound-healing and help reduce postoperative complications following these procedures. We also offer image-guided surgery systems to improve safety and efficacy when surgeons operate near critical structures such as the brain and eyes. The LandmarX Evolution Plus provides a robust, expandable system that may be used for virtually any ENT image guidance procedure. The LandmarX Element is a simple and convenient system ideal for functional endoscopic sinus surgery and novice image guided system users. In November 2007, we announced that results of a laboratory study published in the American Journal of Rhinology suggests that pressurized irrigation of the sinuses in conjunction with a specially designed irrigation solution under development by Medtronic may offer new options to reduce bacteria associated with chronic rhinosinusitis.
Chronic otitis media (ear infections). For the treatment of chronic otitis media, we provide a wide range of middle ear ventilation tubes to facilitate ventilation and prevent fluid accumulation. We also offer powered instruments and drills, such as the XPS 3000 Powered ENT System, to remove enlarged adenoid tissue, enable surgical access and remove diseased bone. Untreated chronic otitis media is the most common cause of hearing loss in children, which can impair learning and speech development. It can also spread to other areas of the head and neck and lead to serious complications.
Hearing loss. To correct conductive hearing loss, we offer various types of implantable middle ear prostheses that replace missing bone(s) in the ear necessary to conduct sound. These products are malleable/trimmable and may be shaped by the surgeon to fit each particular patient’s anatomy.
Thyroid disease. For surgery related to thyroid disease, we offer the NIM-Response 2.0 Nerve Integrity Monitor, NIM-Neuro 2.0 Nerve Integrity Monitor, and NIM EMG Tubes. These products assist surgeons in identifying and continuously monitoring the recurrent laryngeal or vagus nerves during complicated, high-risk thyroid surgery. Since the actual nerve damage during surgery is much higher than perceived, using our nerve monitoring products in these procedures is a benefit to both the patient and the surgeon, reducing the risk of patient injury and enabling more precise, complete dissection.
Ménière’s disease. To alleviate debilitating vertigo associated with the inner ear condition known as Ménière’s disease, we offer the portable, minimally invasive Meniett Low-Pressure Pulse Generator.
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Severe vertigo, which can cause nausea and vomiting, is considered by patients to be the most problematic and debilitating symptom of Ménière’s disease, often affecting their ability to work or participate in daily activities. Using Meniett therapy, patients can self-administer their treatment at home or work for a few minutes each day by delivering low-pressure air pulses through a tube connected to an earpiece placed in the outer ear. In August 2007, we announced that results of a survey published in Otology & Neurotology indicated that our Meniett Low Pressure Pulse Generator is the preferred treatment method after diet modification for patients diagnosed with Ménière’s Disease.
Surgical Access and Cranial Fixation. To facilitate surgical access in cranial, spinal and orthopedic procedures, we offer the Legend electric and pneumatic high-speed powered surgical drill systems. The Stylus system, the most recent addition to the high-speed drill line, provides significant power in a small, ergonomic design. We also offer titanium and resorbable polymer plates and screw systems designed to provide for rigid fixation of the skull. In addition to plates and screws, our Durepair dura substitute is indicated for use as both an on-lay and suturable graft for repair of the dura skin layer.
Hydrocephalus. The Strata valve is an adjustable shunt system for the treatment of hydrocephalus, a condition characterized by an abnormal accumulation of cerebral spinal fluid in the brain. There are two primary forms of hydrocephalus; congenital or pediatric hydrocephalus, and normal pressure hydrocephalus, which afflict the elderly. The Strata valve allows surgeons to non-invasively adjust the valve’s performance level settings with an external magnetic adjustment device. This enables the surgeon to change the valve’s performance characteristics over time without subjecting the patient to additional surgery. The shunt line also includes a wide assortment of nonadjustable valves.
Brain Injury. We also provide a large selection of external drainage and monitoring systems such as the Becker and Exacta systems as well as catheters that are used for the treatment of traumatic brain injury. These systems are designed to remove fluid from the brain in a controlled fashion to alleviate the build-up of intracranial pressure, which can be life threatening.
Navigation. We are one of the leaders in the field of computer-assisted surgery (CAS) and have installed approximately 2,500 StealthStation Treatment Guidance Systems in hospitals worldwide. In recent years, the pace of innovation in CAS has quickened considerably. We have developed and delivered new and updated hardware and software solutions to assist with varied surgeries including total joint replacements, minimally invasive spinal surgery, cranial tumor resection, biopsies, functional neurosurgery, and functional endoscopic sinus surgery. In June 2007, Medtronic acquired the O-arm Imaging System assets of Breakaway Imaging, LLC, a privately held developer of medical imaging systems for surgery. With this acquisition, Medtronic now owns, rather than licenses, exclusive worldwide distribution and marketing rights of the O-arm Imaging System, an intraoperative crossover technology enabling two-dimensional, multi-plane two-dimensional, and three-dimensional volumetric imaging.
Customers and Competitors
Our primary customers for products relating to our ENT diseases and disorders are ENT surgeons and the hospitals and clinics where they perform surgery. The most significant competitors in this part of our Surgical Technologies business are Olympus Corporation and Stryker Corporation.
Our primary customers for our ENT neurosurgical products are neurosurgeons, spinal surgeons, and the hospitals and clinics where they perform surgery. Significant competitors are Johnson & Johnson, Stryker Corporation and Integra LifeSciences Holdings Corporation.
Our primary customers for our computer assisted surgery products are hospitals and clinics. The primary competitors of our computer assisted surgery products are BrainLAB, Inc. and Stryker Corporation.
Physio-Control
We develop, manufacture, market and service external defibrillators, including manual defibrillator/monitors used by hospitals and emergency response personnel and automated external defibrillators (AEDs) used in commercial and public settings. In addition to the portfolio of external defibrillation and emergency response systems, we offer related data management solutions and support services.
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Conditions Treated
Our Physio-Control products are used in the treatment of the condition described below.
| • | Sudden Cardiac Arrest (SCA) — is a condition in which the heartbeat stops suddenly and unexpectedly. SCA is caused by life-threatening arrhythmias or abnormalities in the heart’s electrical system. |
The charts below set forth net sales of our Physio-Control business as a percentage of our total net sales for each of the last three fiscal years:
External Defibrillators. Many victims of SCA could be saved if they had quicker access to AEDs. In the U.S., the survival rate for victims of sudden cardiac arrest is only about 5 percent because the average response time to an emergency call for help is six to twelve minutes. Chances of survival are reduced significantly if the victim is not treated within five minutes. In August 2004, results from the largest-ever clinical trial studying the outcomes of public access to defibrillation were published in the New England Journal of Medicine. The data indicated that the use of portable AEDs by trained volunteers can significantly improve the probability of saving lives that otherwise might have been lost to sudden cardiac arrest. Hospitals, emergency medical services (EMS) and targeted responders rely on LIEFPAK products in the most urgent cardiac emergencies. Our LIFEPAK series of external defibrillators are designed to adapt to the physical needs of the patient and surrounding emergency conditions enabling fast, smooth transitions from the care from EMS to the treatment at the hospital. Physio-Control offers a broad range of life-saving tools for multiple user needs and our products have been incorporated in environments ranging from hospitals to emergency medical units to public places such as airports, sports arenas, schools, and workplaces. Today there are more than 650,000 LIFEPAK devices distributed worldwide.
On December 4, 2006, we announced our intention to pursue a spin-off of Physio-Control into an independent, publicly traded company. However, shortly thereafter, on January 15, 2007, we announced our voluntary suspension of U.S. shipments of Physio-Control products manufactured at our facility in Redmond, Washington in order to address quality system issues. In the months following the suspension of U.S. shipments, we worked diligently with the FDA to address the quality system issues and resumed limited shipments to critical need customers. As a result of the work performed to date, on April 28, 2008, we announced that we had reached an agreement on a consent decree with the FDA regarding quality system improvements for our external defibrillator products. The agreement was filed on April 25, 2008 in the U.S. District Court for the Western District of Washington and was approved by the court on May 9, 2008. The agreement addresses issues raised by the FDA during inspections regarding Physio-Control’s quality system processes and outlines the actions Physio-Control must take in order to resume unrestricted distribution of our external defibrillators. Following the resolution of the quality system issue, we intend to pursue the spin-off of Physio-Control.
Customers and Competitors
The primary customers for our manual external defibrillators are EMS personnel, emergency care doctors and highly-trained nurses. Our primary competitors in the manual external defibrillator business are Zoll Medical Corporation, Philips Medical Systems, Defibtech, LLC and Welch Allyn Inc.
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The primary customers for our AED products are hospitals, schools, governments, businesses, and any other public facility. Our primary competitors in the AED business are Cardiac Science, Inc., Zoll Medical Corporation, Philips Medical Systems, Defibtech, LLC, and Welch Allyn Inc.
Research and Development
The markets in which we participate are subject to rapid technological advances. Constant improvement of products and introduction of new products is necessary to maintain market leadership. Our research and development efforts are directed toward maintaining or achieving technological leadership in each of the markets we serve in order to help ensure that patients using our devices and therapies receive the most advanced and effective treatment possible. We are committed to developing technological enhancements and new indications for existing products, as well as less invasive and new technologies to address unmet patient needs and to help reduce patient care costs and length of hospital stays. We have not engaged in significant customer or government-sponsored research.
During fiscal years 2008, 2007, and 2006, we spent $1.275 billion (9.4 percent of net sales), $1.239 billion (10.1 percent of net sales) and $1.113 billion (9.9 percent of net sales) on research and development, respectively. Our research and development activities include improving existing products and therapies, expanding their indications and applications for use, and developing new products. While we continue to make substantial investments for the expansion of our existing product lines and for the search of new innovative products, we have also focused heavily on carefully planned clinical trials, which lead to market expansion and enable further penetration of our life changing devices.
Acquisitions and Investments
Our strategy to provide a broad range of therapies to restore patients to fuller, healthier lives requires a wide variety of technologies, products, and capabilities. The rapid pace of technological development in the medical industry and the specialized expertise required in different areas of medicine make it difficult for one company alone to develop a broad portfolio of technological solutions. In addition to internally generated growth through our research and development efforts, historically we have relied, and expect to continue to rely, upon acquisitions, investments, and alliances to provide access to new technologies both in areas served by our existing businesses as well as in new areas.
We expect to make future investments or acquisitions where we believe that we can stimulate the development of, or acquire new technologies and products to further our strategic objectives and strengthen our existing businesses. Mergers and acquisitions of medical technology companies are inherently risky and no assurance can be given that any of our previous or future acquisitions will