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Transcript of 2014 Investor Day Conference
St. Jude Medical 2014
Investor Conference
February 7, 2014
2 2
Welcome and Opening Remarks
Dan Starks, Chairman, President and CEO
3 3
This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Such forward-looking statements include the expectations, plans and prospects for the Company, including potential clinical successes, anticipated regulatory approvals and future product launches, and projected revenues, margins, earnings and market shares. The statements made by the Company are based upon management’s current expectations and are subject to certain risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include market conditions and other factors beyond the Company’s control and the risk factors and other cautionary statements described in the Company’s filings with the SEC, including those described in the Risk Factors and Cautionary Statements sections of the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2012 and Quarterly Report on Form 10-Q for the fiscal quarter ended September 28, 2013. The Company does not intend to update these statements and undertakes no duty to any person to provide any such update under any circumstance.
Forward-Looking Statements
4 4
Agenda 8:00 a.m. Overview of St. Jude Medical’s 2014 growth program.
Dan Starks, Chairman, President and Chief Executive Officer
EPS leverage in 2014 and beyond.
Don Zurbay, Vice President, Finance and Chief Financial Officer
Highlights of our CRM business.
Eric Fain, M.D., Group President
The CardioMEMS™ HF System can become a significant new growth driver.
Lisa Andrade, Vice President and Chief Marketing Officer
Panel for Q&A
10:00 a.m. Break
Power of the EP portfolio.
Eric Fain, M.D., Group President
A special focus on Endosense.
Srijoy Mahapatra, M.D., FHRS, Vice President, Clinical, Medical and Scientific Affairs
Executing on a robust CV portfolio.
Eric Fain, M.D., Group President
A deeper dive into Portico™ transcatheter aortic valve.
Phil Ebeling, Senior Vice President, Research and Development
Growth through innovation in neuromodulation.
Eric Fain, M.D., Group President
Panel for Q&A
Lunch Buffet
12:30 p.m. Meeting Ends
5 5
Overview of St. Jude Medical’s
2014 Growth Program
6 6
We accomplished our major growth goals in 2013.
On a constant currency basis, we delivered adjusted EPS growth of 12% on 2% growth in revenue.*
We accelerated our sales growth rate each quarter starting the year with a 3% decline in Q-1 and ending the year with a 6% increase in Q-4.
* All sales growth values in this presentation are expressed on a constant
currency, year-over-year basis.
7 7
Sales growth improvement was broad based due to
encouraging market dynamics and new products
launched in every business.
1H 2013 2H 2013
High voltage (2%) 4%
Low voltage (8%) 1%
Vascular 1% 3%
Structural Heart 2% 8%
Neuro (1%) 2%
AF 10% 9%
Total (1%) 4%
8 8
We view ourselves as a company that entered 2014
with sales growing at an annual rate of
approximately 4%.
This is consistent with the guidance we gave on our Q-4 earnings call that sales would increase approximately 3-5% in 2014.
It usually is more meaningful to consider sales rates based on at least two quarter’s results (4% increase 2H 2013) instead of on a single quarter’s results (6% increase Q-4 2013).
9 9
Looking forward to our sales growth in 2014
10 10
St. Jude Medical’s growth program is based on
innovation. We provide innovative medical
devices that help reduce the cost of health care
and improve patient outcomes for some of our
most expensive, epidemic diseases.
Heart rhythm disorders
Atrial fibrillation
Heart failure
Hypertension
Chronic pain
Stroke
Coronary artery disease
Structural heart defects
11 11
We estimate that the markets we participate in
exceed $20 billion in size and are growing at an
average rate of approximately 4%. Potential
markets (CardioMEMS™ HF System, renal
denervation) provide upside.
Size
Market $ billions Growth %
CRM 10.8 - 0 -
Structural Heart 3.1 9%
AF 2.9 9%
Vascular 1.8 6%
Neuro 2.0 5%
20.6
12 12
We expect our growth rate to benefit from a
tailwind as our sales mix shifts to products in
faster growing markets.
Legacy markets Growth driver markets
CRM* AF
Mechanical heart valves Tissue and TAVR heart valves
Vascular closure Fractional flow reserve (FFR)
Third party Japan Optical coherence tomography (OCT)
Chronic Pain
CardioMEMS™ HF System
Left atrial appendage closure (LAA)
Deep brain stimulation
Renal denervation
* Revenue from CRM products was 59% of our sales mix in 2010 compared
with 51% in 2013.
13 13
We have the right products in the right markets to
accelerate our sales growth over time.
We have plenty of opportunity.
Our primary focus therefore is execution.
14 14
The organizational and leadership changes we have
made since Q-4 2012 are helping us improve our
execution.
Our customers are changing. We are changing with them.
It no longer makes sense to organize by physician specialty in a decentralized structure.
Our transition to a centralized structure helps us leverage our scale, align our priorities, capture technology synergies, improve our quality, and strengthen our focus on the new customer profile that is emerging as a result of health care reform and structural changes to the health care market.
15 15
Our execution is focused on accomplishing all of the
following goals in 2014.
Meet or exceed the guidance we gave on our Q-4 earnings call.
Accelerate our sales growth rate during the year.
Exit 2014 capable of delivering both EPS leverage and mid to high single digit sales growth in 2015.*
* We are not yet issuing guidance for 2015.
16 16
Key execution milestones for 2014
17 17
We expect to resolve our Sylmar FDA warning
letter and improve our flow of new product
launches in the U.S. for our CRM business.
Allure Quadra™ CRT-P and our next generation low
voltage platform of devices (Endurity™ and Assurity™
pacemakers) have been launched in Europe in 2013 and
are approvable in the U.S. pending resolution of the
warning letter.
18 18
We expect to resolve our Plano FDA warning
letter and accelerate neuromodulation sales
growth with new products.
Prodigy™ spinal cord stimulation (SCS) with SJM Burst
technology in Europe.
Protégé™ spinal cord stimulation (SCS) platform in the
U.S.
Submit our PMA for deep brain stimulation (DBS) for
Parkinson’s disease and Essential Tremor indications in
the U.S.
19 19
We expect to accelerate sales growth in our AF
franchise.
The primary catalyst will be a successful ramp-up and
launch of our TactiCath™ line of contact force sensing
ablation catheters (our Endosense acquisition). Impact
should be visible 2H 2014 as manufacturing ramp-up is
completed.
A secondary catalyst will be the expanded roll out of our
MediGuide™ technology together with the effect this has
on adoption of our complete AF and CRM bundles.
20 20
We expect our Nanostim™ retrievable leadless
pacemaker product line launch to begin
impacting sales growth 2H 2014.
Manufacturing ramp-up is underway and should be
completed by mid 2014.
Early KOL feedback encourages us that the Nanostim™
leadless pacemaker platform can evolve into a significant
new growth driver.
This is a disruptive technology.
21 21
Our Portico TAVR program is expected to
contribute higher sales each quarter of 2014.
Our 23mm Portico™ heart valve with a transfemoral (TF)
delivery system was on the market in Europe in 2013 but
addressed less than 10% of the market.
We received CE mark for our 25mm Portico™ heart valve
with a TF delivery system in December 2013. Launch in
Europe already is underway.
We expect to launch our 27mm and 29mm Portico™
heart valve products with TF delivery systems in Europe
during 2H 2014.
22 22
We are enthusiastic about the significant impact the
CardioMEMS™ wireless heart failure (HF) sensor
can provide to Class III HF patients.
CHAMPION trial
1. 28% reduction in hospital readmissions at 6 months.
2. 37% reduction in heart failure hospital readmissions
at 17 months.
This technology has the potential to provide
significant clinical and economic benefits for patients
who suffer from Class III heart failure and become a
major new growth driver.
* CardioMEMS is an independent, privately held company in which STJ holds an
equity interest and an exclusive option to acquire the company.
23 23
We expect new products and expanded programs
throughout our business to help maintain or
improve our sales growth rate in 2014.
Continued role out of the dorsal root ganglion stimulation
(DRG) technology for chronic pain.
Expansion of our FFR, OCT, and LAA closure programs.
We remain optimistic about renal denervation as a
potential new growth driver. We look forward to
reviewing the SYMPLICITY HTN-3 clinical trial results
and incorporating lessons learned into our renal
denervation program.
24
Summary of our sales growth expectations.
We entered 2014 with sales growing at an annual rate of
approximately 4%.
Our sales growth rate should improve as our product mix
continues to shift to faster growing markets.
We expect to launch multiple new growth drivers in 2014,
including CRM products in the U.S., Nanostim™ leadless
pacemaker, TactiCath™ ablation catheter, CardioMEMS™ HF
system, 25mm-29mm sizes of Portico™ heart valve, Prodigy™
SCS with Burst, Protégé™ SCS with upgradeability, and more.
Our goal is to accelerate our sales growth rate during the year
and exit 2014 capable of delivering mid to high single digit
sales growth in 2015.
EPS leverage in 2014 and beyond Don Zurbay, Vice President and Chief Financial Officer
27 27
We are well positioned to continue delivering
EPS leverage in 2014 and beyond.
Our 2014 guidance calls for sales growth of 3 – 5% and
EPS growth of 6 – 8%.
We are continuing to expand manufacturing in cost
advantaged locations.
We see significant opportunity to continue taking costs
out of our business with our on-going restructuring
programs.
We expect economies of scale to evolve for each of our
new growth drivers.
28
We are well positioned to maintain or improve our
gross margin beyond 2014.
Our gross margin is impacted by both positive and
negative factors.
Excise taxes provide a 50 basis point headwind to our
gross profit margin in 2014.
Additionally, we are negatively impacted by geographic
and product mix shifts and lower average selling prices.
We expect to offset the negative factors through
continued expansion of our manufacturing in cost
advantaged locations and other continuous improvement
initiatives.
The negative gross margin impact of our growth drivers
will improve as volumes increase and manufacturing
improvements are realized.
29 29
Opportunities to leverage our global operations and
supply chain
Centralization of our world-wide manufacturing
organization will further enable us to optimize our $1.6
billion in global operations spending.
We are currently manufacturing approximately 60% of our
worldwide volume in cost advantaged locations with an
internal goal of reaching 80%.
Our cost advantaged facilities are at varying stages of
utilization and we have ample capacity to support our
revenue growth over the next five years.
30 30
Optimization of our cost structure
From 2011 to 2013, S,G&A expenses have been reduced
by approximately 170 basis points as a percentage of
sales in a low sales growth environment.
Acceleration of sales growth provides a natural leverage
point to the fixed component of our cost structure
Our current organization has ample capacity to support our
increased sales.
Growth drivers require investment similar to a start up
company and our ratios will improve as we start to
generate meaningful sales.
Moving forward the negative impact of variable interest
entity accounting will ease.
31 31
Optimization of our cost structure
We estimate that we have already generated over $100
million in incremental cost savings as a result of the
restructuring actions announced in 2012 .
We expect additional leverage and productivity
improvements in 2014 and beyond as a result of these
actions as well as the changes announced last week.
The optimization of our cost structure allows us to remain
committed to our innovation-based growth strategy with
our investment in R&D consistently being greater than
12% of sales.
32
OUS Manufacturing's effect on the Tax Rate
The largest driver of our tax rate improvement is
expansion of manufacturing in cost advantaged
locations.
24.5%
22.0%
21.6%20.9%
18.5%
16.0%
18.0%
20.0%
22.0%
24.0%
26.0%
2010 2011 2012 2013 20142010 2011 2012 2013 2014
24.5% 22.0% 21.6% 20.9% 18.5%
33 33
We maintain a conservative balance sheet which
continues to benefit from strong and consistent cash
flow.
Balances as of December 31, 2013:
Cash on hand $1.4 billion
Debt outstanding $3.6 billion
Current credit ratings: Moody’s – Baa1, S&P – A, Fitch – A
For the three years ended 2013, we have generated cash flow from
operations of approximately $3.6 billion, 22% of net sales.
We have ample capacity to continue returning capital to shareholders
while maintaining the capacity to augment our growth strategy with
disciplined acquisitions.
34 34
Dividends and Share Repurchases
Since 2011, the Company has completed $2.8 billion of share
repurchases with an average purchase price of $43.47 per
share.
Share repurchases will manage the dilutive impact of our stock
based compensation.
In February of 2011, the Company initiated a dividend and we
have increased our dividend an average of 9% annually.
The share repurchases and growth in dividend reflects the
strong confidence our management team and our board of
directors have in our long-term growth and success.
35 35
Summary
Our goal is to continue growing sales at a 3% to 5% rate
for full year 2014 and create the conditions to support
faster sales growth in 2015.
We expect to continue delivering EPS leverage in 2014
and beyond.
We have a conservative balance sheet and strong cash
flow to continue to repurchase stock, increase our
dividend, and fund disciplined acquisitions as appropriate.
Highlights of our CRM business Eric S. Fain, M.D. – Group President
38
2013 CRM Highlights
Core CRM markets stabilizing and showing signs of growth
Acceleration of implant growth rates WW throughout the year
Stabilizing ASP trends
Accelerated our sales growth each quarter:
Exited year with share capture in both LV and HV
Market Share leader in U.S. De Novo CRT-D
Third party analysis of STJ data as well as independent large hospital
system experience confirmed the strong performance of Durata™ lead
Over 425,000 leads implanted WW and >6 years of follow-up
De Novo lead-to-port ratio returned to parity with device sales
Expanded our Industry leading product portfolio
Launched new ICD (WW) and pacemaker (Int’l) platforms
Extended our quadripolar leadership with MPP and CRT-P (Int’l)
Significant progress in remediation of Sylmar warning letter
We anticipate FDA re-inspection by the end of 1H 2014
39
Implantable Electronic Systems:
Leveraging Operational Synergies in 2013
Capitalized on the combined strength of our organization and rapidly achieved functional integration:
Reduced costs and improved effectiveness by leveraging a single integrated R&D organization and associated core competencies
Began implementing operational synergies that enhance quality and improve cost structure while also leveraging our existing cost advantaged manufacturing locations
Leveraged integrated clinical study and field clinical engineering organizations to improve execution and timelines
Additional opportunities in the future as we move to common electronics and externals platforms
40
2014 WW CRM Market Dynamics
Expect the 2013 global CRM market to be flat versus
2012 on a CC basis
Renewed unit growth but continued ASP pressure
2H 2013 likely up about 2% vs. 2H 2012 on a CC basis
The mid-point of our guidance range assumes the CRM
market is flat in 2014 vs. 2013 (on an “as reported” basis)
Our model assumes a CRM market of $10.8 billion in 2014
We expect to gain 50 bps of CRM share in 2014:
Differentiated product portfolio
HV replacement tailwind
41
17%
19%
21%
23%
25%
27%
29%
31%
33%
2010 2011 2012 2013 2014 2015 2016 2017 2018
Esti
mate
d M
ark
et
Sh
are
2013 Year End De Novo Share (Est.) Year End Replacement Share (Est.)
Linear Trend to Current De Novo Share 2012 Year End De Novo Share (Est.)
Replacement Share
Share Delta of ~6.5%
Est. +2.0% in 2013
2012 De Novo Share
2013 De Novo Share
U.S. HV Replacement Market Dynamics Our replacements tailwind will continue to support market share capture
CRM Portfolio Highlights
43 43
Continued Innovation across Product Portfolios
Right Products at the Right Time
SJM Quadra family of
devices with
MultiPoint™ Pacing
Nanostim™
Leadless
Pacemaker
CardioMEMS™ HF
System
Allure Quadra™
CRT-P
44 44
Quadripolar Pacing – Standard of Care in CRT Strong clinical evidence driving continued CRT-D share gains
U.S. De Novo market share leader
in CRT-D
Will remain the only quadripolar
system available in U.S. in 2014
Only next generation MPP system
in International markets
Over 100 publications provide broad
clinical evidence supporting the
benefits of the quadripolar system at
implant and follow-up
Clinical benefits also translate into
healthcare economic benefits
Estimated U.S. CRT-D De Novo Market Share
27%
29%
31%
33%
35%
37%
39%
41%
2011 2012 2013
45
Distal 1
Mid 3
Proximal 4
Mid 2
Common Pacing Complications with Bipolar CRT
Addressed with Quadripolar System
Four electrodes and
10 pacing vectors
Allows implant without trading off
stability for electrical performance
46
Quadripolar benefits can lower both the near-term
and long-term overall cost of care
Positive impact to hospitals, ACOs, bundled payment sites and payers
More pacing options to manage implant complications
100% Resolution of Phrenic Nerve Stimulation without surgical lead revision (SLR)1
Significant reduction in surgical lead revisions when compared to bipolar leads2
Better device longevity3
Patients with high LV thresholds could see significant longevity
improvement of up to 17 months using unique quadripolar vectors
Proven efficacy on both objective and subjective measures of HF improvement4
LV volumes, EF and 6-minute walking distance / MN Quality of Life score4
Overall, 66% of patients improved at least 1 class on NYHA scale
Lowered rate of LV lead deactivation/ replacement5
53% of patients programmed to a unique quadripolar vector to avoid pacing complication and
possible surgical lead replacement
pic
1. Zanon et al. Heart Rhythm, Vol. 10, No 5, May 2013. New Onset of Phrenic Nerve Stimulation During Left Ventricular Pacing at Mid-Term Follow Up: A Multicenter Clinical Experience.
2. Viani SM, et al. A new quadripolar lead for left ventricular pacing: short term reliability and future opportunities. Europace. 2011; 13(3), Abstract P408
3. Manyam et al. Heart Rhythm, Vol. 10, No 5, May 2013. Quadripolar Left Ventricular Leads Yield Lower Capture Thresholds With Expected Increase In Battery Longevity.
4. Forleo GB, et al. Heart Rhythm 2012; 9 (11), 1822-1828.e3
5. Turakhia et al. Heart Rhythm, Vol.10, No 5, May 2013. Decreased Risk of Left Ventricular Lead Deactivation and Replacement Associated With Quadripolar LV Leads.
47
1. Tomassoni, G. et al. Post operative performance of a novel left ventricular quadripolar electrode lead. Heart Rhythm. 2011;8(5):S119 (Abs. PO1-43).
2. Thibault B, et al. Electrode Selection to Avoid Phrenic Stimulation with a Quadripolar Left Heart Lead. Heart Rhythm. 2011;8(5):S68 (Abs. AB30-3).
3. Dänschel W, et al. Initial Clinical Experience with a Novel Left Ventricular Quadripolar Lead. Oral Session 183/5. Europace, 2010; 12 (suppl 1): i127.
4. Osca J, et al. Initial Experience with a New Quadripolar Cable for Left Ventricular Stimulation. Impact Over Phrenic Nerve Stimulation and Pacing Thresholds. Heart Rhythm. 2011;8(5):S359 (Abs. Po5-14).
5. Mehta PA, Shetty AK, Squirrel M, et al. Elimination of phrenic nerve stimulation occurring during CRT : Follow-up in patients implanted with a novel quadripolar pacing lead. J Interv Card Electrophysiol 2011 Jul 21.
6. Viani SM, et al. A New Quadripolar Lead For Left Ventricular Pacing: Short Term Reliability and Future Opportunities. Europace 2011 (Abstract).
Clinical results show consistently strong performance
Reduction in Revisions PNS Resolution
Tomassoni1 Thibault2
Danschel3
Osca4
Mehta5
6
48
Clinical Superiority of Quadripolar Technology
NCDR ICD Registry is a national, prospective database managed by the ACC
in collaboration with HRS
Updated analysis used NCDR ICD Registry data for implants performed from
January 1, 2012 through June 30, 2013
STJ quadripolar CRT Technology demonstrated an 89% reduction of failed
implants over non-quadripolar LV leads from all manufacturers
Additional publications expected in 2015 highlighting improved outcomes and
mortality
Non-Quad STJ Quadra P-value
1H 2012 4.20% 0. 51% <0.0001
2H 2012 4.53% 0.49% < 0.0001
1H 2013 4.20% 0.49% < 0.0001
Total (N=56,656) 4.30% 0.49% < 0.0001
NCDR ICD Registry Failed LV Lead Implants*
* Reasons LV leads were not implanted include diaphragmatic stimulation, unacceptable
thresholds, and target vein/coronary sinus access
49
Quadra Assura™ CRT-D MultiPoint™ Pacing (MPP): Building clinical evidence with 2nd generation technology
Two-site LV stimulation extends the capabilities of Quadripolar technology platform with a focus on further improved patient outcomes
Studies demonstrate significant improvement
compared to conventional biventricular pacing
Improved acute hemodynamics with an MPP configuration in large majority of patients1-4
Equivalent improvement seen in both ischemic and non-ischemic patients3,4
No difference between quadripolar lead and multi-branch (2 leads)5
Reduced rate of CRT non-responders
26% more CRT responders (ESV >15% reduction) after 3-month of MPP6
IDE enrollments expected to complete in 2014
1. Rinaldi et al. Acute hemodynamic benefits of multisite LV pacing in CRT recipients. Abstract ACC 2012
2. Thibault et al. Acute hemodynamic comparison of multisite and biventricular pacing with a quadripolar LV lead. Europace 2013 ;15:984-991
3. Pappone et al. Multipoint LV pacing improves acute hemodynamic response assessed with pressure-volume loops in CRT patients. Heart Rhythm 2014 (in press)
4. Rinaldi et al. Acute effects of multisite LV pacing on mechanical dyssynchrony in patients receiving CRT. J Cardiac Failure 2013;19:731-738
5. Shetty et al. A comparison of LV endocardial, multisite and multipolar epicardial cardiac resynchronization: An acute hemodynamic and electro-anatomical study. Europace 2014 (in press)
6. Pappone et al. Multipoint LV pacing in a single coronary sinus branch Improves 3-month echocardiographic and clinical response to CRT. Abstract HFSA 2013
50 50
Allure Quadra™ CRT-P
Strong demand and driving share capture
in Int’l markets
Significant competitive advantage in an
estimated $420M WW CRT-P market
Expands quadripolar portfolio to fastest
growing CRM segment
Market size expected to double in the next
5 years with new indications
No known competitive quadripolar
pacemakers in pipeline
Capitalize on rapid growth in the CRT-P
segment driven by BLOCK HF results
(AHA 2012) and BIOPACE (2H 2014)
Significant appeal to pacer implanters
who begin implanting CRT-P
Leverages new LV platform for improved
cost structure
$200
$250
$300
$350
$400
$450
2011 2012 2013 2014
$M
M
Estimated CRT-P Market Revenue
WW Market Size
11% CAGR
51
Expanding portfolio of quadripolar lead
options
3 lead shape options
2 electrode spacing options to
facilitate basal pacing
All spacing options maintain 4
discrete electrode locations for pacing
vector selection
Smaller diameter for easier access to
tortuous anatomy
Designed for MRI compatibility
Quartet™ NXT LV Leads Extending Quadripolar Leadership with 2nd generation technology
52
Leadership in Low Voltage Platform in 2014
Assurity™ and
Endurity™
Allure Quadra™ Accent MRI™ Nanostim™
Significant technology advantages to drive share
gains in ~$4B low voltage market
53 53
Brady MRI Compatibility
Industry best lead handling
No scan zone/power restrictions
Efficient workflow using the STJ MRI
activator
Continued success in Int’l markets Strong adoption following launch in Japan
Accent MRI IDE Study: Expect to complete
MRI scans and follow-up in 2H 2014
Will continue to expand product portfolio of
MRI compatible devices Expect to launch restricted MRI models in
Int’l markets in 2014 for tiering
54 54
Nanostim™ Leadless Pacemaker
Specifically designed for repositioning and chronic
retrievability (catheter-based)
Energy efficient design
High-capacity battery
No losses due to lead conductor resistance
Proprietary low-power “conducted communication”
Designed to prevent dislodgement
Double fixation: single turn helix (x 2 pull-strength)
plus angled nylon sutures
Radiographic indicator to ensure proper number of turns
Tethered test mode for intraoperative evaluation
Delivered via 18F introducer
Supported by Merlin™ Patient Care System
First and only commercially available leadless pacing system
55 55
Standard Pacemaker Leadless Pacemaker
Implant procedure Surgical pocket + lead Percutaneous femoral based
Implant time 30 – 45 minutes 15-20 minutes
Cosmetics Scar, Visible Device No Scar, No Visible Device
Post-Implant Restrictions Limited arm movements
Wound care/ sutures
No heavy lifting
Minimal
(faster patient recovery)
Connections Lead-can connectors None
Chronic tricuspid valve
interference
Yes (lead) No (leadless)
Longevity 9-13 years 9-19 years
Battery Replacement Pocket access Femoral access
MRI compatibility Conditional – image impact Inherently MRI compatible
Comparison with Conventional Lead-Based System
56 56
Complication Occurrence Leadless Advantage
Lead dislodgement 2.2% to 3.7% Not applicable/ No lead
Low risk of device dislodgement
Pneumothorax 1.6% to 2.6% No Risk - Not applicable
Lead perforation 0.5%-1% Not applicable – No Lead
Low risk of device perforation
Venous thrombosis 1%-3% No Risk – Not applicable
Chronic Lead failure 2%-4% of pts at 5 years Not applicable – No Lead
Hematoma requiring surgical
evacuation
<0.5% Reduced Risk
Skin erosion (generator
change)
0.8-0.9% No Risk – No Pocket
Pocket Infection • < 1% for single-
chamber
• 3-5% for generator
change
No Risk – No Pocket
Complications Associated with Pacemakers
57
Launch Summary
Initial launch feedback and enthusiasm in EU
has been even greater than anticipated
Strong success with initial implants driving
continued demand
Strong interest from historically non-STJ
customers
Unprecedented interest in U.S. IDE study
Strong interest in Japan/Asia due to lack of
scar/visible device
Significant media attention and coverage
driving patient awareness
Significant market opportunity in ~$700M
single-chamber pacemaker segment
58
Clinical Summary
LEADLESS Study: First in Man
Successful delivery in 32/33 patients (97%)
Short Procedure Times
Introducer in/out: 28 minutes
Catheter in/out: 16 minutes
Excellent pacing and sensing performance
LEADLESS II IDE Study
PMA Submission requirement: 300 patients followed
for 6 months
First implants Feb 2014
Leadless Pacemaker Observational Study (International)
1000 patients at ~100 sites followed for 5 years
Enrollment underway
59 59
Nanostim™ Dual Chamber Leadless Pacemaker
Dual chamber pacemakers represent >70%
of worldwide pacing market
Approximately $3B market in 2014
Development work underway to expand
Nanostim technology
Single chamber development helps validate delivery
and dual chamber feasibility
Low power conducted telemetry scheme can be
leveraged for device-to-device communication
resulting in low impact to device longevity
Communication between devices demonstrated in
animal studies
60
Summary of CRM Highlights for 2014
The global CRM market has stabilized
We expect to gain share in the high voltage segment due
to replacement market dynamics and leadership in
quadripolar CRT-D
The Nanostim™ leadless pacemaker and our Allure
Quadra™ CRT-P product lines give us clear leadership in
a $1 billion component of the low voltage segment
The midpoint of guidance that assumes we will gain
approximately 50 basis points of share in a stable market
is well supported and may be conservative
We have completed all remediation activities associated
with the Sylmar site Form 483 and warning letter and we
anticipate FDA re-inspection by the end of 1H 2014
The CardioMEMS™ HF System
can become a significant new
growth driver Lisa Andrade – Vice President and Chief Marketing Officer
* CardioMEMS is an independent, privately held company in which STJ holds
an equity interest and an exclusive option to acquire the company.
63
CardioMEMS™ HF System
Sensor with Delivery Catheter System
Permanent implant
No batteries or components that
require replacement
Implanted into pulmonary artery
Uses a safe, well-understood right heart
catheterization procedure
Electronics
Patient configuration
Hospital/clinic version
Website
PA pressure readings and trends
Systolic, Diastolic and Mean
PA pressure waveforms
Heart rate
At-home
In-hospital
64
Heart Failure Burden in the United States1,2
5.1M Americans suffer from HF
>650,000 new HF diagnoses each year
1 in 2 HF patients die in 5 years
Burden on healthcare system is high
2.8M office and ED visits each year
1.0M HF hospitalizations each year
Leading cause of hospitalizations among >65
years old patients
Every 30 seconds, someone is hospitalized
for HF
1 Go A, et al. Heart Disease and Stroke Statistics 2013 Update: A Report from the American Heart Association.
Circulation. Published online December 12, 2012. 2 Blecker, S, Paul, M et al. Heart failure-associated hospitalizations in the United States. JACC 2013 61:12 (1259-1267)
Heart Failure is a growing and expensive public health issue
of HF patients
die in 5 years1
50% 5.1M
65
Economic Burden of HF Admissions in the US
Total cost of HF in the US
expected to double by 20301
$31B/year in 2013, $70B/year in 2030
>1/2 of costs spent on hospitalizations2
5.1 day average hospital length of stay4
High readmission rates
25% readmission within 30 days2
50% readmission within 6 months3
1/5th of all Medicare admissions in the
US have a diagnosis of heart failure5
Most HF patients suffer
re-congestion within 60 days
Even at the best hospitals6
1 Go A, et al. Heart Disease and Stroke Statistics 2013 Update: A Report from the American Heart Association. Circulation. Published online December 12, 2012.
2 2013 ACCF/AHA Guideline for the Management of Heart Failure: A report of the ACC/AHA Task Force on Practice Guidelines. Circulation. Published online June 5, 2013.
3 Focus Update Incorporated into the ACC/AHA 2005 Guidelines for the Diagnosis and Management of Heart Failure in Adults: Circulation 2009;119; e391-e479(e437) 4 National Health Statistics, National Hospital Discharge Survey: 2007 Summary October 26,2010 5 Emory Healthcare. Heart Failure Statistics. Emory Healthcare [serial online]. Published 2013. Accessed April 2, 2013. 6 Lala, et al. for H-FAN. HFSA 2013 7 MEDPAC, Report to Congress: Promoting Greater Efficiency in Medicare, June 2007. Advisory Board Cardiovascular Roundtable Research & Analysis as reported in Publication 20286C entitled
“Transformative Care Delivery, Part II: Reducing Preventable Readmissions.”
$31 Billon annual Cost of HF in US1
5.1 days
average hospital
length of stay4
$600M spent annually on
preventable Medicare HF
patient readmissions7
66
New York Heart Association (NYHA) Class III
Leads HF Admissions
NYHA Class III patients have marked limitation in activity even during minimal activity.
They are comfortable only at rest.
1 CVRG, 2007; McCullough, 2002; McAllister, 1999 [41-43} 2 Fonarow G, et al. Overview of Acutely Decompensated Congestive Heart Failure
(ADHF): A Report from the ADHERE Registry. Heart Failure Reviews 9, 179-185,
2004
Approximately 1 in 3 HF Patients are NHYA Class III.
These patients comprise almost half of the HF admissions.
29%
44%
0%
20%
40%
60%
80%
100%
% of HF patients % of HF admissions
NYHA I
NYHA II
NYHA III
NYHA IV
1 2
67
Economic Risks of HF Readmissions in the US
Medicare’s Hospital Readmissions Reduction (HRR) Program
Program penalizes hospitals who have above average risk adjusted
all-cause readmissions within 30 days following HF, Acute MI,
Pneumonia discharge
Withholding of all inpatient Medicare payments
Up to 2% in 2014
Up to 3% by 2015 and beyond2
Total 2013 impact3
$280M withheld
2,217 hospitals impacted
1 Dharmarajan K, Hsieh AF, Lin Z, et al. Diagnoses and Timing of 30-Day Readmissions After Hospitalization for Heart Failure,
Acute Myocardial Infarction, or Pneumonia. JAMA. 2013;309(4):355-363. Linden A, Adler-Milstein J. Medicare disease
management in policy context. Health Care Finance Rev. 2008;29(3):1-11. 2 CMS Hospitals Readmissions Reductions Program of the Patient Protection and Affordable Care Act (PPACA), 2010.
3 - http://www.kaiserhealthnews.org/stories/2012/october/03/medicare-revises-hospitals-readmissions-
penalties.aspx?referrer=search
2014 CMS Benchmark Target
30-day Readmissions Rate1
68 68
CardioMEMS™ HF System and Pressure Monitoring
Weight and BP
Impedance
Pressure
No Reduction in HF
Hospitalizations
Poor Marker
(TIM-HF, TELE-HF)
No Reduction in HF
Hospitalizations
High false positives
(DOT-HF)
Significant Reduction in HF
Hospitalizations
Right marker, Right management
approach
(COMPASS, CHAMPION,
HOMEOSTASIS™)
CardioMEMS
PA Pressure
The Right Approach to Management of HF
69 69
COMPASS
HOMEOSTASIS™
CHAMPION
Right Parameter – Pressure
Right Patients – Class III
Right Approach – Management to target pressures and
physician directed patient self management
Right Parameter – Pressure
Right Patients – Class III
Right Approach – Management to target pressures
Right Parameter – Pressure
Right Patients – Class III showed significant benefit
Wrong Patients – Including Class IV resulted in no benefit
Wrong Approach – Management to pressure spikes
X X
Multiple Studies have Shown that Pressure Monitoring
is the Right Strategy to Reduce HF Hospitalization
70 70
Cu
mu
lati
ve N
um
ber
of
HF
R H
osp
ital
izat
ion
s
0
20
40
60
80
100
120
140
160
180
200
220
240
260
Days from Implant
0 90 180 270 360 450 540 630 720 810 900
270 262 244 210 169 131 108 82 29 5 1280 267 252 215 179 137 105 67 25 10 0
No. at RiskTreatmentControl
Primary Endpoint
Treatment Control
CHAMPION Trial: Primary Endpoint Met Cumulative HF Hospitalizations Reduced At 6 Months and Full Duration
Abraham WT, Adamson PB, Bourge, RC et al. Wireless pulmonary artery hemodynamic
monitoring in chronic heart failure: a randomized controlled trial. The Lancet. 2011:377;658-66.
28%
Reduction at 6 months
37%
Reduction at Full
Duration
71 71
CHAMPION Trial: Principal Findings
Pulmonary Artery Pressure Monitoring
Medication Changes Based on PA Pressure p<0.0001
<1 medication change per patient per month
Pulmonary Artery Pressure Reduction
p=0.0077
Heart Failure
Hospitalization Reduction
p=0.0002
Quality of Life
Improvement
p=0.0236
*p values for Treatment vs Control Group
Abraham WT, Adamson PB, Bourge, RC et al. Wireless pulmonary artery hemodynamic
monitoring in chronic heart failure: a randomized controlled trial. The Lancet. 2011:377;658-66.
72 72
Nearly half of all HF
admissions are for patients
with preserved Ejection
Fraction1
Limited treatment options
available
Currently not candidates for
ICD or CRT therapy
CMS ADHF Admissions1
HF-pEF
HF-rEF
not assessed
43.6%
38.8%
17.6%
1 Kociol et al AHJ 2010
HF Patients with Preserved EF –
An Even Bigger Challenge to Manage
73
HF Management with CardioMEMS™ HF System
Reduced HF Hospitalization in Preserved EF Patients
0%
10%
20%
30%
40%
50%
HFrEF HFpEF
P<0.0001
vs control
P=0.0085
vs control
Re
lative
Ris
k R
ed
uctio
n
HF Hospitalization Reduction
(6 mos follow-up)
reduced EF (<40%) preserved EF (>40%)
1Kociol et al AHJ 2010 2 Adamson PB et al. CardioMEMS Heart Sensor Allows Monitoring of Pressures to Improve
Outcomes in NYHA Class III Heart Failure Patients (CHAMPION) Trial: Impact of Hemodynamic
Guided Care on Patients with Preserved Ejection Fraction. Additional updated data on file.
In the US, nearly half of HF
admissions are for patients with
preserved EF1
HF management guided by the
CardioMEMS HF System reduced
HF hospitalizations in patients with
either preserved or reduced EF2
The CHAMPION trial is one of the
first successful management
strategies to reduce HF
hospitalization in this patient
population
74 74
Intervention Trial
Mean Duration
of
Randomized
Follow-Up
Annualized Reduction
in
HF Hospitalization Rates
Number Needed to Treat
(NNT) per year to
Prevent 1 HF Hospitalization
Beta-blocker COPERNICUS 10 months 33% 7
Aldosterone antagonist RALES 24 months 36% 7
Cardiac resynchronization CARE-HF 29 months 52% 7
Beta-blocker MERIT-HF 12 months 29% 15
ACE inhibitor SOLVD 41 months 30% 15
Aldosterone antagonist EMPHASIS-HF 21 months 38% 16
Digoxin DIG 37 months 24% 17
Angiotensin receptor blocker Val-HeFT 23 months 23% 18
Angiotensin receptor blocker CHARM 40 months 27% 19
Pulmonary artery pressure
monitoring at home CHAMPION 17 months 33% 4
Clinical Significance of CHAMPION Results
75
CardioMEMS™ HF System Reimbursement Hospital Inpatient
Established ICD-9 procedure code for implant (38.26)
Maps to DRG 264 – average base payment with adjustments of $17,820
CardioMEMS™ HF System has applied for New Technology DRG Add-On
Payment
1 of 7 applications CMS will review
If approved, effective October 1, 2014 for 2-3 years
If approved, provides up to 50% of cost of device + DRG payment
Physician
Implant
Physician may bill for right heart catheterization + pulmonary angiography
(established codes) + sensor implant (unlisted CPT code)
For unlisted codes physician uses a comparable procedure
Remote Monitoring
Current coding applies (same as CRM) – Monthly
76
CardioMEMS™ HF System Launch Readiness
The manufacturing capacity and the inventory needed to
launch the CardioMEMS HF system product line in the
U.S. are already in place
We do not need to add sales representatives to support
this launch
Market development will take time, but we are ready to
begin launching the CardioMEMS HF system product line
in the U.S. after the product is approved by the FDA
77
CardioMEMS™ HF System Summary
CardioMEMS HF system is the right product for the right
market at the right time
We think the CardioMEMS HF system product line can
become a significant new growth driver for St. Jude
Medical
78 78
Panel for Question and Answer Session
Power of the EP Portfolio Eric S. Fain, M.D. – Group President
80 80
2014 Estimated Worldwide EP Market Size
Revenue in Millions
EP Ablation Catheters
$1,000 35% EP Diagnostic
Catheters $680 23%
Mapping/ Navigation/ Recording
$550 19%
Access $370 13%
ICE/Other $300 10%
2014 Market Revenue $2.9B
Market Growth: 9% - 11%
81
Treated with
Catheter Ablation
2.2%
2014
~$58 Billion
~12.9M
Symptomatic
AF
~$1.3B market
Treated with
Catheter Ablation
1.9%
2013
~$56 Billion
~12.5M
Symptomatic
AF
Estimated WW AF Market Opportunity AF is the fastest growing market segment within the EP space
Treated Population
~3% CAGR
(Sources: MRG, HRI, Miyasaka – Circ 2006, WHO 2002, US Census Bureau, STJ estimates)
~$4,500/case
19% Growth
Diagnosed Symptomatic
AF Population
~$1.1B market
AF Diagnosed Symptomatic AF Population
AF Population treated w/ Catheter Ablation
82 82
Growth in AF Ablation Procedures
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
2011 2012 2013 est. 2014
210,000
250,000
295,000
350,000
’11 - ’14 CAGR = 19%
WW AF Ablation Procedures Catheter and Surgical
83 83
Favorable STJ Dynamics In A Growing Market
High interest in differentiated STJ technology
MediGuide™ Technology
TactiCath™ Quartz Contact Force Ablation Catheter (Endosense)
Advanced portfolio of ablation solutions
Building foundational clinical data
CABANA
EAST
STAR VT
Toccata/Efficas/Toccastar
Unmet need for optimized workflow and procedural
efficiencies
84
MediGuide™ Technology – Cornerstone of the
Integrated Lab
Expand STJ presence through
our Integrated Lab offering
Reducing radiation
Increasing workflow efficiency
and reducing healthcare costs
Potential for improving patient
outcomes
MediGuide Technology
3D visualization and precise
navigation platform across EP
and CRT procedures
Enables navigation of devices
on pre-recorded fluoroscopy and
enhances performance of
EnSite™ Contact Force Module
85
The MediGuide™ Technology Platform Continues to Grow
Increasing adoption as we continue to build synergies with
STJ’s broad portfolio of catheters and tools
Additional CRT tool options 2H 2014
Strong clinical evidence demonstrating radiation reduction for
increased patient and laboratory staff safety
Numerous Single Center and Multi-Center studies published in 2013
Potential for increased procedural/economic efficiencies and
improved patient outcomes
86 86
2014 Advanced Ablation Solutions
St. Jude Medical
Advanced Ablation Solutions
TactiCath™ FlexAbility™
Catheter EnSite™
Precision™ Ampere™
WorkMate Claris™
Agilis™
87
Extensive thought leader
involvement throughout design
and testing to result in best in
class workhorse catheter
Flex irrigated electrode tip
Full portfolio of curve shapes,
including asymmetric options
FlexAbility™ Ablation Catheter
Handle and shaft that performs across the range
of EP procedures, including transeptal and retrograde approaches
Platform for future MediGuide™ sensors
CE Mark and FDA approval anticipated 2H 2014
TactiCath™ Quartz Ablation Catheter
Irrigated ablation catheters
featuring contact force
technology
Technology acquired in
2013 from the Endosense
acquisition
Commercially available
today in Europe and other
International markets
FDA approval with AF indication anticipated 2H 2014
89 89
Ampere™ RF Ablation Generator
Complete redesign of hardware
and software to improve
workflow and optimize the
integrated lab experience with:
Intuitive design and adjustable
settings
High fidelity signals
New features, including power
control mode and remote control
CE Mark approved end 2013
and FDA approval anticipated
2H 2014
WorkMate Claris™ Recording System
Only fully integrated EP system
on the market with stimulation
Redesigned hardware and
software for exceptional signal
clarity
Easier, more efficient analysis of patient data, including
Application Control software for protection and compliance
Enhanced productivity through system integration and data
workflow integration for one, electronic patient record
First commercial availability in Europe and the US end 2013
91 91
EP Summary
AF is an expensive, epidemic disease
The potential market for innovative medical devices that
help reduce the cost of care and improve outcomes for
patients who suffer from AF is only 2% penetrated
We expect revenue from our AF business to continue to
grow at a high single digit or low double digit rate in 2014
driven by our product innovation
A special focus on Endosense Srijoy Mahapatra, M.D., FHRS - VP, Clinical, Medical & Scientific Affairs
94 94
2014 Estimated Worldwide EP Market Size
Revenue in Millions
*Estimated current market share
2014 Market Revenue $2.9B
Market Growth: 9% - 11%
EP Ablation Catheters
$1,000 35%
EP Diagnostic Catheters
$680 23%
Mapping/ Navigation/Recording
$550 19%
Access $370 13%
ICE/Other $300 10%
STJ 14%*
95
Solution II: Flex Tip with best in
class maneuverability
Solution I: Leading the way with
Contact Force
2014: A New Era for STJ Ablation Catheters
TactiCath™ Quartz Ablation Catheter Commercial in International Markets
FDA Approval Anticipated 2H 2014
FlexAbility™ Ablation Catheter CE Mark Anticipated 2H 2014
FDA approval Anticipated 2H 2014
96 96
TactiCath™ Quartz Contact Force Ablation Catheter
Background (Force Sensing)
Pioneering solution to give physicians a real-time,
objective measure of the force they apply to the heart wall
during a catheter ablation procedure
CE Mark approved for AF and supra ventricular tachycardia (SVT)
ablation
U.S. IDE clinical trial complete; anticipating FDA approval with an
AF indication in 2H 2014
97
Why Contact Force?
Safely create durable transmural lesions
Time. Power. Force.
98
Established Clinical Value for
TactiCath™ Contact Force Ablation Catheters
TOCCATA • Safety and feasibility of Force Sensing
EFFICAS I • Contact Force parameters on minimum values and
Force Time Integral
EFFICAS II • Significantly better outcome using Contact Force
TOCCASTAR • IDE clinical data
99
Optimal Force leads to reduced recurrence of AF
TactiCath™ Ablation Catheter Guidelines for Force
Sensing
1. Reddy et al.; The relationship between contact force and clinical outcome during radiofrequency catheter ablation of atrial
fibrillation in the TOCCATA study. Heart Rhythm, 2012 Nov;9(11):1789-95.
2. Neuzil et al. Electrical reconnection after pulmonary vein isolation is contingent on contact force during initial treatment: results
from the EFFICAS I study. Circ Arrhythm Electrophysiology. 2013 Apr;6(2):327-33.
100
TactiCath™ Ablation Catheter Clinical Findings
Reddy et al.; The relationship between contact force and clinical outcome during
radiofrequency catheter ablation of atrial fibrillation in the TOCCATA study. Heart
Rhythm, 2012 Nov;9(11):1789-95.
0
20
40
60
80
100
0-10 g 10-20 g 20+ g
100% 53% 80%
47%
20%
No success Success
100%
80%
60%
40%
20%
0%
Using Force less than 10g leads to AF recurrence;
Greater than 20g for each lesion is good target
101
TOCCASTAR Study
Study Design
Prospective, multicenter (EU & US), IDE study
Randomized TactiCath™ Ablation Catheter vs. Biosense
Webster ThermoCool™; non-inferiority comparison
Safety and effectiveness study, 12 months follow-up
post PVI
317 patients with paroxysmal AF
Expect results to be presented at HRS; intend to publish
findings in a leading medical journal
Trial completed, PMA submitted
Anticipate FDA approval 2H 2014 (AF indication)
102 102
TactiCath™ Quartz Ablation Catheter Advantages
TactiCath ablation catheter's proprietary optical sensor
technology leads to potential clinical advantages over other
sensing alternatives
Technical Feature Potential Clinical Advantage
Fiber optic sensing Force measured closer to tip Force measured where power applied
50Hz sampling rate (vs. 20Hz) Higher rates allow visualization of transient peaks with cardiac movement and increase the feeling of real-time feedback
No calibration required Saves time and shortens procedure
Other sensor needs recalibration as often as every 15 min due to temperature changes
103 103
Integration Update
Functional transitions completed in Q4 2013
Development, manufacturing, and quality functions have
been integrated into St. Jude Medical
European sales teams are fully commercial
FDA PMA Submission Complete
Submitted Continued Access Protocol
Expect CAP cases 1H 2014
Anticipated FDA approval 2H 2014 (AF indication)
104
Part II: New Era for STJ Ablation Catheters
Solution: Flex Tip with best in class
maneuverability and signal quality
FlexAbility™ Ablation Catheter CE Mark and FDA approval anticipated
2H 2014
Internal STJ Development Project
Elite KOLs supporting efforts with
pre-clinical evaluations to ensure
steady stream of feedback
throughout the process
Share gaining opportunity with
workhorse device that is
complementary with TactiCath™
ablation catheter with premium
contact force technology
105
Flex Tip is a critical element
incorporated into design
International Markets have the first
generation Flex Tip available; it is
the best selling STJ ablation
catheter in both Europe and Japan
To achieve best in class maneuverability,
we launched a collaborative effort between
clinical, R&D, and external physicians
Features targeted for optimized performance include:
durability, signal quality, handling, and lesion quality
22 EP’s have validated multiple design iterations over the
past 6-months via pre-clinical effort
FlexAbility™ Ablation Catheter
106 106
Ablation Catheter Summary
One of the most significant new growth drivers in our AF
business for 2014 will be the launch of our TactiCath
contact force sensing line of ablation catheters
Physician feedback leads us to believe that contact force
sensing catheters may help improve the safety and
efficacy of AF ablation procedures
During 2014, we expect to launch both TactiCath™ and
FlexAbility™ lines of ablation catheters and gain share in
the $1 billion ablation catheter segment of the EP market
Executing on a robust CV portfolio Eric S. Fain, M.D. – Group President
109 109
STJ PCI Optimization™ Leadership in 2013
We are the WW leader in the fast-growing market of FFR-guided
interventions for coronary artery disease
The global market for FFR products exceeded $250 million in 2013 with
strong double digit growth
We believe we will take share and continue to grow the FFR market in 2014
We are driving OCT market expansion
We grew our OCT disposables revenue double digit as customers switched
from IVUS to OCT
We are advancing the field of imaging with even higher resolution, new stent
planning tools and 3D reconstruction
We are the leader in clinical evidence development for FFR and OCT
FAME I, FAME II, FAME III, ILUMIEN I
110
FFR & OCT Markets Underpenetrated & Growing
0%
5%
10%
15%
20%
25%
30%
35%
40%
FFR OCT IVUS
Revenue growth driven
by STJ technologies:
FFR & OCT
Growth in OCT at the
expense of IVUS
Even at today’s low
penetration rates, the
current combined market
for IVUS, FFR and OCT
is ~$800 million
2012 2013 2014*
FFR, OCT & IVUS
Penetration - WW
* 2014 penetration rates are projected
2012 2013 2014* 2012 2013 2014*
111 111
2014 PCI Optimization™ System Growth: Driven by Workflow Enhancement, Technology Advancement,
and Clinical Outcomes
Workflow
• Pre-installed, ready to use FFR into all new cath lab systems
• Fully integrated OPTIS™ systems
• Leverage growing install base of ILUMIEN™ OPTIS™ system and QUANTIEN™ platform
Technology
• Launch new PressureWire Aeris™ system
• Roll out automated stent planning tools & 3D reconstruction
• Introduce angio co-Registration with OCT
Outcomes
• Adoption of appropriate use criteria
• Leverage FAME clinical programs
• Now funding FAME III
• Build upon ILUMIEN™ OCT clinical program
112 112
Nearly all hemodynamic/cath
lab systems sold today have
Aeris-compatible FFR pre-
installed, making every recipient
a potential customer with no
capital purchasing barrier
Pre-installed FFR into Nearly All New Cath Lab Systems
Workflow Enhancement Drives Penetration
113 113
STJ’s first cath lab-integrated
PCI optimization™ platform,
offering both anatomical (OCT)
and physiologic (FFR)
assessment
Always there, always on, no
barriers for usage
Provides competitive advantage
Limited launch anticipated 2H
2014
Workflow Enhancement Drives Penetration
Fully Integrated OPTIS PCI Optimization™ System
114 114
Technology Advancement Drives Preference
The only wireless FFR system on
the market
Designed for quick access and
smooth stent delivery
Near 1:1 torque response
matching frontline workhorse
guidewires
Incorporates new miniaturized
radio transmitter for better
maneuverability and margin
improvement
Launch ongoing
9th Generation PressureWire Aeris™ System
PressureWire Aeris 9th generation PressureWire
115 115
Directly links OCT with
angiography-- the standard
of care imaging modality
Provides for more accurate
lesion assessment and stent
deployment compared to
angio or OCT alone
Accelerates the OCT
learning curve
Limited launch anticipated
2H 2014
Technology Advancement Drives Preference
Angio Co-Registration with OCT
116 116
Clinical Outcome Drives Penetration
FAME Clinical Program Influenced Appropriate Use Criteria
FAME Clinical Program AUC & Expert Consensus
supports the use of FFR
117
Left Atrial Appendage Closure
We expect LAA closure to become an essential tool in the
tool box of full-service EP and interventional practices
STJ has wide access to AF patients through existing sales
channels
Full commercialization of the AMPLATZER™ Cardiac Plug (ACP) is underway in approved markets
Stable market share in a market with strong double digit growth
LAA closure device inclusion in ESC guidelines has helped contribute to market growth
118
LAA Closure – Amplatzer™ Amulet device
2nd generation device
Improves upon an already successful ACP device
Pre-loaded in catheter sheath to improve ease-of-use
Addresses a broader range of patient anatomies
Expect European launch in 2H 2014
AMPLATZER™ Amulet
Disc and Proximal End
Screw
119
LAA Closure – Re-launch U.S. IDE Study
The ACP IDE trial enrollment was stopped in December 2013
Trial was an event-driven design comparing LAA to OAC and
requiring up to 3000 patients
Made decision to stop enrollment due to expected near-term
approval of a competitive device and potential enrollment challenges
No safety or efficacy issues
Currently working with FDA on a revised trial design which
should result in an accelerated time to market
Expect to start enrollment in 2H 2014
120
Renal Denervation Update We remain optimistic about renal denervation as a potential
new growth driver
Hypertension is an expensive, epidemic disease that has
significant clinical and cost implications for physicians,
hospitals, payers and patients
Like many early stage therapies, we recognize there is a lot to
learn – at this time there are more questions than answers
What we do know is that renal denervation has consistently
been shown to be safe
We also know that STJ has a strong history with RF ablation
technologies
The internally developed EnligHTN™ system uses a multi-
electrode system that differs from the competitive system
We look forward to reviewing the SYMPLICITY HTN-3 clinical
trial results with our Global Renal Denervation Advisory Board
and the EnligHTNment Clinical Trial Steering Committee and
will incorporate lessons learned into our program
121
Tissue Valves Represent a Growing Segment for STJ
2009 2010 2011 2012 2013 2014E
TAVR has helped the surgical aortic
valve replacement (SAVR) market to
grow through increased patient
referrals
Since the launch of the Trifecta™
valve, STJ has almost doubled tissue
valve revenue through market growth
and share gains
STJ Tissue Heart Valve Market Share
STJ Tissue Heart Valve Revenue
$0
$50
$100
$150
$200
$250
$300
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E
Millio
ns
Trifecta Milestones:
CE Mark 2010
FDA 2011
PMDA 2012
122 122
CV Summary
PCI optimization™ is a large potential opportunity where
we lead in innovation, clinical development and market
expansion
We expect a steady improvement in our growth rate as we
continue to transition our sales mix from legacy products
to growth drivers
We are optimistic that in 2014 our tissue heart valves,
FFR, OCT and LAA will continue to grow at a high single
digit or low double digit rate
A deeper dive into Portico™
Transcatheter Aortic Valve Phil Ebeling – Sr. Vice President, R&D
Device referenced is approved for CE Mark. Not available for sale in the U.S.
125
Market Opportunity
Diagnosed Prevalence (Severe Aortic Stenosis): 500K
25% TAVR penetration
Patients (US/EMEAC/Japan) 125K
Estimated 2013 Market Size ~$1.0B
Forward 5 Year CAGR 17%
Market Opportunity $2.5-3.0B
Transcatheter Aortic Valve Replacement (TAVR)
126
Positive Market Dynamics for TAVR
Positive Dynamics
650 WW TAVR centers today
Favorable reimbursement in place in 8
OUS geographies
Long term clinical and economic
evidence is available and supports
TAVR
Improving overall TAVR outcomes
(improved patient selection, lower
profile devices)
TAVR moving into lower-risk patients
(SURTAVI, PARTNER II)
$329.1
$470.6
$648.5
$738.3
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
2013 2014
Reve
nu
e i
n T
ho
us
an
ds
ID
U.S.
$978
$1,209
127 127
Portico™ Transcatheter Aortic Valve offers a design
alternative to many existing TAVR limitations and
challenges
Designed to be fully resheathable and repositionable
Designed to mitigate heart block
Designed to minimize PV Leak
Designed to minimize coronary ostia blockage post
implantation
Designed for maximum durability
128 128
Portico™ Transcatheter Aortic Valve is designed to
be fully resheathable and repositionable*
The unique valve and delivery system design of Portico heart valve
allows the ability to fully reposition the valve:
Resheath the valve proximally or distally*, in situ
Retrieve the valve, if necessary
Resheathability is designed to enable optimized valve positioning
during implantation and helps insure better outcomes (ex: PV Leak) *Until fully deployed
Manoharan, G., St. Jude Medical Portico™ Transcatheter Aortic Valve Clinical Experience, EuroPCR, 05/17/2012.
129
Portico™ Transcatheter Aortic Valve is designed to
mitigate heart block
Designed to address conduction system interference
Ability to fully reposition the valve in situ for improved placement accuracy
Valve placed low within the stent frame allows for sealing without the valve
extending deep into the LVOT
Nonflared annulus section of the stent frame
Valve placed
low within the
stent frame
Nonflared
annulus section
of the stent
130
Portico™ Transcatheter Aortic Valve is designed to
minimize PV Leak
Calcific
nodules
Single porcine pericardium cuff seam
The large cells in the annulus section of
the stent are designed to minimize the
risk of PV leak
Less metal — minimizing the potential of a
stent strut resting against a calcific nodule
More tissue — allowing the tissue to
conform around calcific nodules
Paravalvular Leak Simulation
131
Portico™ Transcatheter Aortic Valve is designed to
minimize coronary ostia obstruction post implant
Large stent cells in the
aortic section of the stent,
allows access to coronary
ostia post-implant
Manoharan, G., St. Jude Medical Portico™ Transcatheter Aortic Valve Clinical Experience, EuroPCR, 05/17/2012.
Aortic
Section
Annulus
Section
132
Portico transcatheter aortic
valve is designed for leaflet
coaptation in round and
elliptical annulus
configurations
In vitro testing is completed
over the valve’s use range
and in various annulus
configurations to
assess durability and
hemodynamic
performance
Circular Configuration
Ellipse 0° Ellipse 90°
Portico™ Transcatheter Aortic Valve is designed for
maximum durability and hemodynamic performance
133
* Manoharan, G., How New Designs Lead to Improved Clinical Results in TAVR, TCT 2013
134
Portico™ Transcatheter Aortic Valve
US IDE Pivotal Trial, CE Mark Update
Full IDE approval using 23 & 25mm valves at 40 US sites
in a head to head trial with other TAVR valves
~1610 patients split into high and extreme risk cohorts
Randomized against commercially available TAVR valves
Primary non-inferiority endpoint for all-cause mortality and disabling stroke at
one year
27 & 29mm will be added in the trial in 2H 2014
FDA has indicated that TAVR is now considered established rather than novel
FDA has recently engaged STJ on alternative trial designs that should
significantly reduce the size and duration of the trial
STJ will start enrollment under current design and use patients toward future
analysis
On track for the first implants in 1H 2014
CE Mark
23, 25mm valves - market released
27, 29mm valves - enrollment to begin 1H 2014, commercialize 2H 2014
135 135
Next Generation Portico™ Transcatheter Aortic
Valve – Product Pipeline
Delivery System Designs:
Improved placement accuracy (co-axial alignment of
the valve)
Reduction in vascular complications (further profile
reduction)
Improved user interface (ergonomics)
Valve Designs:
Further minimization of PV Leaks (integrated solutions)
Broader range of valve sizes
136 136
Portico™ Transcatheter Aortic Valve Summary
Positive clinical and economic evidence is driving the
growth of the TAVR market
Portico transcatheter aortic valve is a next generation
product line that addresses many existing TAVR
limitations and challenges and is expected to become a
competitive new growth driver for St. Jude Medical
Growth through innovation in
Neuromodulation Eric S. Fain, M.D. – Group President
139
Plano Warning Letter Resolution
Completed all remediation activities associated with the
Plano site Form 483’s and warning letter
Anticipate FDA re-inspection by end of 1H 2014
140
WW Neuromodulation Dynamics
Approximately $2.0 billion market in 2014
~$1.5B chronic pain; ~$0.5B deep brain stimulation
Expect both the US and International markets will grow at a mid to high single digit rate in 2014
Payers increased focus on clinical outcomes
Market fundamentals support continued strong growth
Severely under penetrated market
Increasing stigma and impact from long-term opioid use
Growing evidence for improved outcomes and healthcare economics with earlier intervention
Opportunities for share capture through innovation
Leverage innovation resident in CRM devices and bring to SCS/DBS systems
Create novel stimulation modes and explore anatomical targets
Expand indications
141
SCS for Chronic Pain:
Need for alternative stimulation modes
SCS for Neuropathic pain is an accepted
standard of care in the treatment of
chronic pain
However, as therapy adoption grows there
is increasing awareness of SCS non-
responders or patients who become non-
responders over time
Anecdotal evidence suggests as high as 20-
30% of CP market (over time)
Little predictive evidence to say who will
respond/not respond
Increasing market need for an alternative
stimulation mode to address non-
responders
142
Evolution of Stimulation Modes to Tune Therapy
Tonic
Standard waveform in today’s devices
Relatively low energy
Recharge ~1-2 hours, ~2 times per week
High Frequency
Reduces paresthesia
Rapid battery drain
Recharge ~4-6 hours, 1-2 times daily
STJ Burst
Reduces paresthesia
Minimal battery drain
Recharge ~1-2 hours, ~2 times per week
143
Lateral
Discriminatory
Pathway
Medial
Affective/Attentional
Pathway
Pain Perception
Attention to pain
Why Burst Stimulation?
Pain processing patterns and
pathways
Lateral discriminatory pathway –
controls pain perception
Medial affective/attentional pathway –
controls emotional response and
attention to pain stimuli
IPG stimulation patterns and
pathways
Tonic – Modulates only the lateral
pathway
Burst – Modulates both the lateral
and medial pathways to maximize
effectiveness
1. Jahnsen H, Llinás R. : Voltage-dependent burst-to-tonic switching of thalamic
2. Harvey A. Swadlow1 & Alexander G. Gusev : The impact of 'bursting' thalamic impulses at a neocortical synapse. Nature
Neuroscience 4, 402 - 408 (2001).
3. Sherman SM : A wake-up call from the thalamus. Nature neuroscience, 2001 cell activity: an in vitro study. Arch Ital Biol.
1984 Mar;122(1):73-82.
4. DeRidder D, Plazier M, Kamerling N, Menovsky T, Vanneste S. (2013) Burst Spinal Cord Stimulation for Limb and Back
Pain. World Neurosurg. 2013 Jan 12. pii: S1878-8750.
5. DeRidder D., Vanneste S., Plazier M., van der Loo E., & Menovsky T. (2010). Burst Spinal Cord Stimulation: Toward
Paresthesia-Free Pain Suppression. Neurosurgery, 66(5): 986-990.
1-3
5
4-5
144
STJ Burst – Growing Body of Clinical Data*
Burst vs. Tonic Clinical Experience
Consistent results across studies and sites
Patient preference for Burst over Tonic
Reduced paresthesia
Improved activity levels
Reduced attention to pain
0
1
2
3
4
5
6
7
8
9
Belgium The Netherlands Total
Vis
ual
an
alo
g S
cale
A Multicenter Study on Tonic and Burst Spinal Cord Stimulation (N=102)
baseline tonic stimulation burst stimulation
* Data on file
0
2
4
6
8
10
12
14
16
18
Pain intensity Impact on life(affective)
Patient preference
Vis
ual
an
alo
g S
cale
A Randomized Double-blind, Placebo-controlled Study: FBSS (N=20)
Placebo Tonic (500Hz) Burst
0
1
2
3
4
5
6
7
Overall Pain Limb Pain Trunk Pain
Vis
ual
an
alo
g S
cale
Burst in Patients with Chronic Tonic Stimulation (N=21)
Tonic Burst
145
Smallest SCS device on the market (<18cc)
Rechargeable with industry leading 10 years
longevity
Only device capable of bi-modal stimulation
patterns of both Burst and tonic
Compatible with all legacy leads to include
percutaneous, paddle and perc-paddle types
Lower power requirements vs. high frequency
Reduced paresthesia sensation
Expect CE mark and European launch 1H 2014
Prodigy™ SCS System with Burst Technology
SUNBurst IDE Study
Burst vs. tonic
First patient enrolled 2014
146
Protégé™ SCS System with
Upgradeable Technology
First and only upgradeable SCS system
Smallest SCS device on the market (<18cc)
Longest warranty in its class
Compatible with legacy leads to include
percutaneous, paddle and perc-paddle types
New features can be introduced to the
Protégé system via software updates allowing
for upgraded technology to be used
Anticipate U.S. launch 2H 2014
ID: H1’14
´ ´
147
SCS MRI Platform
Receive
Transmit
Initial approval covers head and
extremity scans with few restrictions
Addresses the majority of scan
procedures performed
Includes percutaneous and paddle
leads Paddle lead MRI scan capability is
unique to STJ and represents largest
and fastest growing portion of our
business
Anticipate EU and U.S. launch in
2H 2014
Providing STJ SCS patients access to diagnostics capabilities of
the MRI technology
148
Delivering the Next Generation Implantable Platforms
New redesigned SCS and DBS system families
Common electronics platform leveraging CRM
experience to impact the following attributes:
Size - New smaller size/shape to address implanter and
patient needs
Programmability - Expanded stimulation modes
Configurability – Compatible with legacy and new lead
constructs to serve novel anatomical target sites (DRG)
Longevity - Improved longevity and features to meet
global requirements
MRI compatibility - Designed for maximum patient
safety and practice efficiency in the MRI environment
Manufacturability - Improved manufacturability to
achieve high quality and reduce manufacturing costs
Platform design to be completed 2014
Rechargeable
Current
New
Primary Cell
Current
New
149
Delivering the Next Generation External Platforms IP
G
Pa
tie
nt
Co
ntr
oll
er
Cli
nic
Pro
gra
mm
er
Tri
al
Invisible
Trial
New
Programmer
Wireless
Patient Controller
Current 2014 2015
150
SCS of the Dorsal Root Ganglion (DRG)
Traditional SCS
DRG Stimulation
DRG is where the primary sensory neurons (PSNs) are located
PSNs serve as a primary source of information and important “pain” processing point
DRG is consistently located from person to person making targeting reliable and repeatable
Requires ~95% less power
Less positional variation in stimulation
Targets both focal and broad areas of intractable chronic pain that traditional SCS therapy has low rates of success such as:
Peripheral neuropathy
Groin pain
Abdominal pain
CRPS
CAUTION: Investigational Device. Limited by Federal Law
to investigational use. Not available for sale in the US.
151
6%
4%
<1%
0%
2%
4%
6%
8%
10%
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
CRPS FBSS PeripheralNeuropathies
SC
S P
en
etr
ati
on
Pre
va
len
ce (
Th
ou
san
ds)
SCS of the DRG
Peripheral Neuropathies
Highest prevalence of all pain syndromes with lowest SCS penetration rate
Lowest traditional SCS success rate at 54%
Highest DRG stimulation success rate at 90%
CAUTION: Investigational Device. Limited by Federal Law
to investigational use. Not available for sale in the US.
152
Head, back, leg and vascular
ONS (intractable chronic migraine)
RAP (refractory angina pectoris)
FBSS (with or without prior surgery)
PVD (peripheral vascular disease)
Thorax and focal lower extremity
Thoracic Neuropathies (Post-mastectomy,
thoracotomy)
Abdominal and Visceral Pain
Post-Surgical Pain (i.e. hip, knee, foot, etc.)
Groin and Testicular Pain
Phantom and Stump Pain (Post Amputation)
CRPS (localized foot/ knee/hand/)
Distally Located Neuropathies
Traditional SCS focus SCS of the DRG focus
CAUTION: Investigational Device. Limited by Federal Law
to investigational use. Not available for sale in the US.
SCS of the DRG Addresses a Unique and
Complementary Patient Population
153
Spinal Modulation, Inc. Axium™ SCS System
Complements STJ Portfolio for Chronic Pain
STJ traditional SCS is very effective for
back pain
SMI Axium SCS system is ideal for difficult-to-
treat anatomies including the groin, abdomen,
foot and lower limb
Together we offer the broadest portfolio of
products to treat chronic pain
STJ distribution in Europe and Australia
STJ sales reps trained
STJ has exclusive option to acquire SMI based
on regulatory and revenue milestones
Axium U.S. IDE study ongoing
CAUTION: Investigational Device. Limited by Federal Law
to investigational use. Not available for sale in the US.
154
DBS for Movement Disorders –
Pathway to Broad Indication Coverage
Parkinson’s Disease
IDE clinical trial completed with all effectiveness and safety endpoints met (results published in Lancet Neurol 2012: 11:140-149)
Related device quality systems improvements being implemented
FDA PMA submission 1H 2014
Essential Tremor
IDE clinical trial completed with all effectiveness and safety endpoints met
FDA PMA submission 1H 2014
CE submission 1H 2014
Dystonia
CE mark approval 2H 2013
155
Neuromodulation Summary
We have completed all remediation activities associated
with the Plano site Form 483’s and warning letter and we
anticipate FDA re-inspection by the end of 1H 2014
We expect the combined U.S. and Int’l market of $2 billion
to grow at a mid to high single digit rate in 2014
We are leveraging our CRM experience to launch
redesigned, next generation SCS and DBS system
families
We expect revenue for our neuromodulation business to
accelerate during 2014 due to the impact of new products
156 156
Panel for Question and Answer Session
157 157
Thank you for attending
St. Jude Medical’s
2014 Investor Meeting