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34 ANNUAL
J.P. MORGAN
HEALTHCARE
CONFERENCE
JANUARY 11, 2016
SAN FRANCISCO
OMAR ISHRAK
CHAIRMAN & CEO
This presentation refers to historical financial data that sums historical data of both Medtronic and Covidien.
This data is different than the pro forma information previously included within certain SEC filings.
Management believes that using these measures are a useful way to evaluate Medtronics underlying
performance. All reconciliations of these measures to the most directly comparable GAAP financial measures
are attached.
Comparable Basis: Includes Covidien plc in the prior year comparison and aligns Covidiens prior year
monthly revenue to Medtronics fiscal quarters.
Combined Basis: Combines Covidiens closest reported quarter with Medtronics fiscal quarter in the prior
year comparison.
2
GUIDANCE UPDATE
REITERATING 2H FY16 REVENUE OUTLOOK; UPDATING FY16 EPS
REVENUE OUTLOOK
Net result of the capital allocations announced today are not expected to
materially affect 2H FY16 net interest expense, net earnings, diluted
weighted shares outstanding or diluted earnings per share
1
4
Constant currency.
34th Annual J.P. Morgan Healthcare Conference | January 11, 2016
Improve Clinical
Outcomes
SOURCES
OF GROWTH
MEDTRONIC
STRATEGIES
Growth Vector #1
New
Therapies
Therapy
Innovation
+150 to 350bps
Operational
Execution
Expand Access
Globalization
Growth Vector #2
Emerging
Markets
Reliable,
consistent midsingle digit growth
EPS leverage of
200-400bps
+150 to 200bps
Growth Vector #3
Services and
Solutions
Economic
Value
+40 to 60bps
Note: All references to revenue growth and EPS leverage are on a constant currency basis.
5
FINANCIAL
MODEL
Return a minimum
of 50% FCF to
shareholders
+2.0%
+4.5%
+4.0%
+6.0%
+6.0%
8.0%
6.0%
4.0%
Mid-Single
Digit
Range
2.0%
0.0%
-3.5%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
FY11
FY12
FY13
NON-GAAP EPS2
$4.50
$4.00
$3.50
$3.00
Billions
400 bps of cc
leverage
100bps
FY11
FY12
= Returned to shareholders.
FY11
1
2
3
FY15
FY16
400bps
FY13
FY14
FY12
400bps
FY14
200bps
700-950bps
FY15
FY16E
FY13
FY14
FY15
Constant currency. Q1 FY11 and Q1 FY16 adjusted for extra week impact. Q4FY15 through Q2 FY16 on a comparable basis.
Non-GAAP EPS on a constant currency basis. Leverage rounded to the nearest 50bps.
34th Annual J.P. Morgan Healthcare Conference | January 11, 2016
FCF is operating cash flow minus capital expenditures.
Adjusted for litigation settlements.
FY16E
PRESERVE
Employee
satisfaction
and talent
retention
Revenue and
EPS growth
across groups
INTEGRATION PRIORITIES
2
OPTIMIZE
4
3
ACCELERATE
TRANSFORM
Delivering higher value
in healthcare
Aligning solutions to
emerging value-based
payment models
Partnering with new
stakeholders to
transform the
healthcare marketplace
PRESERVE
GROWTH
PRESERVATION
TALENT RETENTION
Medtronic and Covidien
cultures continue to
come together
employee satisfaction
remains strong
Monthly survey
encourages open
communication
8%
SUSTAINABILITY
Diabetes
10%
6%
4%
2%
0%
FY14
MDT INC.
1H FY15
COV
1H FY16
RTG
25%
FY14:
$17.0B
FY15:
3
$28.2B
CVG
52%
MDT PLC
Diabetes
6%
CVG
35%
MITG
34%
OPTIMIZE
Superior Sourcing
Renegotiating sourcing contracts for
freight, logistics and distribution
Direct sourcing and self-insurance
Manufacturing Consolidation
1
2
3
COV 1H FY15 represents Y/Y constant currency growth for calendar 1Q15 and 4Q14.
Comparable, constant currency. Q1 FY16 adjusted for extra week impact.
FY15 revenue on a comparable basis.
34th Annual J.P. Morgan Healthcare Conference | January 11, 2016
ACCELERATE
NEUROVASCULAR
Critical element
40%
of rapidly
developing MDT
Neuroscience
strategy within
RTG
Leveraging the
neurologist callpoint
30%
Y/Y Medtronic
Neurovascular Growth
+32%
+23%
+25%
20%
10%
0%
TRANSFORM
PERIPHERAL VASCULAR
Q1 FY16 adjusted for extra week impact and Y/Y growth in comparable constant currency.
34th Annual J.P. Morgan Healthcare Conference | January 11, 2016
FY16E FY18E
Accessible
FCF
Trapped
FCF
~$5.5B
Trapped
FCF
Dividends
Financial
Flexibility
Trapped
Cash to B/S
~$6B
Trapped
B/S Cash
Share
Repurchase
M&A
Debt
Issuance
Only ~35% of Free Cash Flow Accessible
Issued Debt to Cover Additional Accessible
Cash Needs
Trapped Cash Accumulated
Returned ~50% of Free Cash Flow to
Shareholders
10
~$11B
Accessible
FCF
Dividends
Share
Repurchase
Debt
Paydown
~$9.3B
Untrapped
B/S Cash
Incremental
Share
Repurchase
$4B
Accessible
B/S Cash
Free cash flow (FCF) defined as Operating Cash Flow less Capital Expenditures
Outer rings are sources of cash. Inner rings are uses of cash.
34th Annual J.P. Morgan Healthcare Conference | January 11, 2016
1. FY12-FY15, not including impact of Covidien acquisition.
SHARE REPURCHASES
18.0
~$15B
15.0
9.0
~$6.2B
3.0
0.0
~$7.0B
6.0
Incremental
$5B Share
Repurchase
12.0
ADDITIONAL DELEVERAGING
$ Billions
FY10-FY12 1
Dividends
FY13-FY15
FY16-FY18E
1
FY12 includes $213M of proceeds related to the sale of Physio-Control used for share repurchases.
Note: Free cash flow (FCF) defined as Operating Cash Flow less Capital Expenditures
34th Annual J.P. Morgan Healthcare Conference | January 11, 2016
11
$2.75
$2.50
$2.25
35%
$1.75
$1.50
$1.25
$1.00
30%
25%
$0.75
$0.50
Payout Ratio1
$0.25
20%
$0.00
1
12
On a non-GAAP basis. Calculated as annual dividend per share divided by prior year non-GAAP earnings per share.
34th Annual J.P. Morgan Healthcare Conference | January 11, 2016
FY20E
FY18E
FY16E
FY14
FY12
FY10
FY08
FY06
FY04
FY02
FY00
FY98
FY96
FY94
FY92
FY90
FY88
FY86
FY84
FY82
FY80
FY78
15%
Payout Ratio
$2.00
40%
RTG
Diabetes
Brain
ENT Stroke
Movement Disorders
Intensive Insulin
Management
Type 1
Diabetes
MITG
Surgical Innovations
Thoracic GYN Bariatric
Colorectal General Surgery
Early Technologies
Lung / Gastrointestinal Cancer
Patient Monitoring
& Recovery
Respiratory Infection
Nutritional
Deep Vein
Insufficiency Thrombosis
Renal Care
Non-Intensive
Diabetes Therapies
Pre-Diabetes
Type 2
Diabetes
Diabetes Service
& Solutions
Integrated Care
Solutions
Spine
Spinal Deformity
Degenerative Spinal
Conditions
Pain
Chronic Pain
Trauma
Comorbidity
Strong
CrossGroup
Synergies
Integrated Technology
Clinical / Regulatory Expertise
Sales to Large Entities (Governments / Providers)
Global Manufacturing / Operations / Distribution
Corporate Infrastructure
Portfolio
Criteria
13
Is Medtronic Positioned
to Win?
Stroke
Patient
SolitaireTM
Medina
Identifying
Root Cause
Reveal
LINQ
14
Treating
Root
Cause
AF
Therapy
ESRD
Patient
Vascular
Access
Structural
Heart
Therapies
Care
Management
Services
Optimized
Management
Reveal
LINQ
SEEQ Patch
SEEQ Patch
Lazarus
PipelineTM Flex
Carotid
Stents
DCB
Advanced
Dialysis
Care
Management
Services
Future
Co-morbidity
Applications
Diabetes
CGM/
Pump
Heart
Failure
Devices
TYRX
DES
Meets Portfolio
Criteria
MITG
RTG
Diabetes
Therapy
Innovation
Partnership
Investment
Partnership
Globalization
Partnership
Economic
Value
Partnership
Minimal to no
net EPS dilution
THERAPY INNOVATION
$ CONTRIBUTION
$ Billions
35.0
30.0
25.0
20.0
15.0
10.0
5.0
Note: All growth rates and revenue amounts are as reported and include both Covidien and Medtronic.
FY20E
1H
FY16
FY15
FY14
FY13
FY12
FY11
0.0
Intrepid
TMVR
Intellis RC
Resolute
Onyx (US)
CoreValve
(Japan)
Micra TPS
(CE)
Evera MRI
ICD
CoreValve
Evolut R
MRI Safe
CRT-D
GastriSail
Barrx 360
Express
In-Stent
Restenosis
Visia AF
MRI
FY16
Cervical
Fixation
System
Endurant Evo
(CE)
Micra TPS
(US / Japan)
Signia
Powered
Stapler
MiniMed
670G (US)
CoreValve
Evolut R
(Japan)
TAVR
Guardian
Intermediate
Connect with
Risk
Enlite 3 (US)
CRT-P Quad
(EU)
Medina Embolization
iPro3 (EU)
Evolut R
XL
LINQ
(Japan)
RDN
Pipeline Flex
(US)
Sapiens
Valiant Evo
(EU & US)
Drug Filled
Stent (EU)
Resolute
Onyx (Japan)
FY18
FY17
Pedicle
Screw
System
Robotics
Platform
Beyond
GLOBALIZATION
$ CONTRIBUTION
$ Billions
8.0
6.0
~10%
ASEAN
~5%
4.0
Greater
China
~40%
Latin
America
~20%
2.0
1H
FY16
FY15
FY14
FY13
FY12
FY11
0.0
Note: All growth rates and revenue amounts are as reported and include both Covidien and Medtronic.
1
Percentages calculated based on reported sales by geography.
~20%
$5B
Existing
technology
Out-of-pocket
payment or
reimbursement
established
Annual
Opportunity
Comparable
margins to
developed
markets
Channel
Optimization
Private
Partnerships
Public
Partnerships
APPROACHES
OPPORTUNITY
20
Responsibilities
Adjust distributor margins
correspondingly
Distributors focus more on logistics
and last-mile services
DISTRIBUTOR TRANSITIONS
TURKEY
Q4 FY14: Formed Biostar JV with
largest distributor; expanding to
additional business units
SAUDI ARABIA
Q1 FY16: Formed JV with largest
distributor (Gulf Medical) for select
business units
PRIVATE PARTNERSHIPS
Commercial commitment
21
750
Includes Care
Management
Services
(Cardiocom), Cath
Lab Managed
Services, Operating
Room Managed
Services and
Diabeter
500
250
Figures do not
reflect related
device revenue
Note: All growth rates and revenue amounts are as reported and include both Covidien and Medtronic.
FY20E
1H
FY16
FY15
FY14
FY13
FY12
FY11
Medical
Devices
New Offerings
Wrap-Around
Programs
Independent Health
Solutions
Core business
Proprietary
technology
Examples:
ICD, Stent, Spinal
Fixation System, Insulin
Pump
Examples:
CVG Solutions, Surgical
Synergy, Diabetes Services &
Solutions
Primary Customers:
Physicians, Patients
Primary Customers:
Hospital Department
Administrators, Physicians
Examples:
Care Management Services,
Cath Lab Managed Services,
Operating Room Managed
Services, Diabeter
Primary Customers:
Hospital Administrators,
Payers, Governments
Medtronic
Integrated Health Solutions
23
MEDTRONIC
VALUE-BASED
HEALTHCARE
FOCUS
MEDTRONIC LEGACY
BUSINESS MODEL
ACTIVITY BASED
PROCESS MEASURES
HIGHEST COST
PATIENTS
INTEGRATED CARE/
BUNDLED PAYMENT
BROADEN PATIENT
POPULATION,
INCORPORATING
BUNDLED PAYMENTS TO
ADDRESS HIGH COST,
HIGH ACUITY PATIENTS
CAPITATION/
GLOBAL PAYMENT
ACCOUNTABLE
CARE/
SHARED SAVINGS
PAY FOR
PERFORMANCE
FEE FOR SERVICE
(e.g. DRGs)
24
3
DEVELOP BUSINESS
MODEL
IDENTIFY
DEFINE AND BASELINE
PATIENT COHORT
OUTCOMES
STEPS TO VALUE-BASED HEALTHCARE
SELECT A
DISEASE OR
CONDITION
DEVELOP
PATIENT
COHORTS
BASED ON
RISK AND
PROTOCOLS
DEFINE
OUTCOME
MEASURES
THAT ARE
MEANINGFUL
FOR
PATIENTS
DEFINE
TIMEFRAME
REQUIRED TO
ACHIEVE
OPTIMAL
OUTCOME
QUANTIFY
BASELINE
OUTCOMES
AND COSTS
FOR EACH
PATIENT
COHORT
DETERMINE
PROSPECTIVE
PERFORMANCE
AND COST
OBJECTIVES
THE VALUE
PROPOSITION
DEVELOP
BUSINESS
MODEL
Consistent mid1
single digit growth
200-400bps of EPS
1
Leverage
~200bps dividend
2
yield today
Double Digit Total
Shareholder Return
1
2
26
28
29
30
31
32
33
34
35
36