Medtronic 2012 Annual Report Download - page 28

Fiscal Year 2010
On April 21, 2010, we acquired Invatec S.p.A. (Invatec), a developer of innovative medical technologies
for the interventional treatment of cardiovascular disease. Under the terms of the agreement, the transaction
included an initial up-front payment of $350 million, which included the assumption and settlement of
existing Invatec debt. The agreement also included potential additional payments of up to $150 million
contingent upon achievement of certain revenue and product development milestones. During fiscal year
2012, we paid an aggregate of $141 million upon achievement of these milestones.
Patents and Licenses
We rely on a combination of patents, trademarks, copyrights, trade secrets, and nondisclosure and non-
competition agreements to establish and protect our proprietary technology. We have filed and obtained
numerous patents in the U.S. and abroad, and regularly file patent applications worldwide in our continuing
effort to establish and protect our proprietary technology. U.S. patents typically have a 20-year term from
the application date while patent protection outside the U.S. varies from country to country. In addition, we
have entered into exclusive and non-exclusive licenses relating to a wide array of third-party technologies.
We have also obtained certain trademarks and tradenames for our products to distinguish our genuine
products from our competitors’ products, and we maintain certain details about our processes, products,
and strategies as trade secrets. Our efforts to protect our intellectual property and avoid disputes over
proprietary rights have included ongoing review of third-party patents and patent applications. For
additional information see “Item 1A. Risk Factors” and Note 17 to the consolidated financial statements in
“Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.
Markets and Distribution Methods
We sell most of our medical devices through direct sales representatives in the U.S. and a combination
of direct sales representatives and independent distributors in markets outside the U.S. The three largest
markets for our medical devices are the U.S., Western Europe, and Japan. Emerging markets are an area of
increasing focus and opportunity as we believe they remain underpenetrated.
Our marketing and sales strategy is focused on rapid, cost-effective delivery of high-quality products
to a diverse group of customers worldwide – including physicians, hospitals, other medical institutions, and
group purchasing organizations. To achieve this objective, we organize our marketing and sales teams around
physician specialties. This focus enables us to develop highly knowledgeable and dedicated sales
representatives who are able to foster strong relationships with physicians and other customers and enhance
our ability to cross-sell complementary products. We believe that we maintain excellent working
relationships with physicians and others in the medical industry that enable us to gain a detailed
understanding of therapeutic and diagnostic developments, trends, and emerging opportunities and respond
quickly to the changing needs of physicians and patients. We attempt to enhance our presence in the medical
community through active participation in medical meetings and by conducting comprehensive training
and educational activities. We believe that these activities contribute to physician expertise.
In keeping with the increased emphasis on cost-effectiveness in health care delivery, the current trend
among hospitals and other customers of medical device manufacturers is to consolidate into larger
purchasing groups to enhance purchasing power. As a result, transactions with customers have become
increasingly significant and more complex. This enhanced purchasing power may also lead to pressure on
pricing and increased use of preferred vendors. Our customer base continues to evolve to reflect such
economic changes across the geographic markets we serve. We are not dependent on any single customer
for more than 10 percent of our total net sales.
Competition and Industry
We compete in both the therapeutic and diagnostic medical markets in more than 120 countries
throughout the world. These markets are characterized by rapid change resulting from technological
advances and scientific discoveries. In the product lines in which we compete, we face a mixture of
competitors ranging from large manufacturers with multiple business lines to small manufacturers that offer
a limited selection of products. In addition, we face competition from providers of alternative medical
therapies such as pharmaceutical companies.
Major shifts in industry market share have occurred in connection with product problems, physician
advisories, and safety alerts, reflecting the importance of product quality in the medical device industry. In
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