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75732me_10K.indd 39 6/25/13 6:39 PM
Table of Contents
fiscal year 2012. The Valiant Captivia Thoracic Stent Graft System was launched in the U.S. in the fourth
quarter of fiscal year 2012 and in Japan and China in the first quarter of fiscal year 2013.
• Continued and future acceptance of the Endurant II AAA Stent Graft System. Our Endurant II AAA Stent Graft
System was launched in Europe in the third quarter of fiscal year 2012 and in the U.S. in the first quarter of
fiscal year 2013.
• Continued acceptance of our CoreValve transcatheter heart valve technologies for the replacement of the aortic
valve. The CoreValve System has CE Mark approval and is currently available outside the U.S. The CoreValve
31 millimeter received CE Mark approval in the first quarter of fiscal year 2012. The CoreValve Evolut 23
millimeter valve, which promotes better sealing and provides future recapturability, was launched in Europe
in the late first quarter of fiscal year 2013. We continue to make progress on the CoreValve System in the U.S.
pivotal study; and remain on track to commercialize in the U.S. in fiscal year 2015. Additionally, patent litigation
is pending in both Germany and the U.S.; for additional information, see Note 17 to the consolidated financial
statements in "Item 8. Financial Statements and Supplementary Data" in this Annual Report on Form 10-K.
• Continued and future growth from our Engager transcatheter aortic valve implantation system. The Engager
System was launched in Europe in the fourth quarter of fiscal year 2013.
Restorative Therapies Group The Restorative Therapies Group is composed of the Spine, Neuromodulation, Diabetes, and
Surgical Technologies businesses. Products in the Restorative Therapies Group include products for various areas of the spine,
bone graft substitutes, biologic products, trauma, implantable neurostimulation therapies and drug delivery devices for the treatment
of chronic pain, movement disorders, obsessive-compulsive disorder (OCD), overactive bladder, urinary retention, fecal
incontinence and gastroparesis, external insulin pumps, subcutaneous CGM systems, products to treat conditions of the ear, nose,
and throat, and devices that incorporate advanced energy technology. Additionally, this group manufactures and sells image-guided
surgery and intra-operative imaging systems. The Restorative Therapies Group’s net sales for fiscal year 2013 were $7.895 billion,
an increase of 3 percent over the prior fiscal year. Foreign currency translation had an unfavorable impact on net sales of
approximately $104 million when compared to the prior fiscal year. The Restorative Therapies Group’s performance was a result
of strong net sales in Surgical Technologies, as well as solid growth in Neuromodulation and Diabetes, partially offset by declines
in Spine, primarily driven by BMP (comprised of INFUSE bone graft (InductOs in the EU) sales) and BKP. The Restorative
Therapies Group’s performance was favorably affected by the recent launches and continued adoption of new products, strong
sales of capital equipment, the acquisitions of Salient and PEAK in the second quarter of fiscal year 2012, and continued signs of
stabilization in the U.S. Core Spine market, and negatively affected by continued pricing and competitive pressures. See the more
detailed discussion of each business’s performance below.
Spine net sales for fiscal year 2013 were $3.131 billion, a decrease of 4 percent over the prior fiscal year. Core Spine and BMP
net sales decreased 2 percent and 15 percent, respectively, as a result of continued pricing and competitive pressures, a challenging
reimbursement environment in certain of our major markets, and unfavorable foreign currency translation. The U.S. Core Spine
market showed signs of stabilization during fiscal year 2013, as supported by the flat fiscal year 2013 market and no significant
changes in the underlying market conditions, including procedure trends, pricing pressure, or competitive dynamics. The net sales
decline in Core Spine over the prior fiscal year was primarily driven by negative performance in BKP. Net sales in BKP declined
10 percent when compared to the prior fiscal year due to the continued decrease in demand, competitive pricing pressures, and
reimbursement challenges with select payers. The decline in Core Spine from BKP was partially offset by recent launches of new
products and therapies, including the second quarter launch of AMT implants, the Capstone Control, and Bryan ACD Instrument
Set, as well as the continued adoption of Solera, Atlantis Vision Elite, and other biologics products. Core Spine also benefited
from our focus on enabling technologies, including the O-Arm imaging, StealthStation surgical navigation, and Powerease powered
surgical instruments. A strong contributing factor to the decline in Spine net sales was the decline in BMP net sales over the prior
fiscal year. Significant declines in U.S. sales of INFUSE bone graft have continued since the June 2011 articles in The Spine
Journal as further described below.
Neuromodulation net sales for fiscal year 2013 were $1.812 billion, an increase of 7 percent over the prior fiscal year. The increase
in net sales was primarily due to the continued U.S. adoption of RestoreSensor spinal cord stimulator, new implant growth of
Activa DBS system for movement disorder, and sales of InterStim Therapy for overactive bladder, urinary retention, and bowel
control. Additionally, revenue growth in Western Europe was driven by sales of the SureScan spinal cord stimulation system,
approved for full-body MRI scans. Growth was partially offset by unfavorable foreign currency translation.
Diabetes net sales for fiscal year 2013 were $1.526 billion, an increase of 3 percent over the prior fiscal year. The increase in net
sales was driven by international sales of our Paradigm Veo insulin pump along with the Enlite CGM sensor, partially offset by a
decline in insulin pump sales in the U.S. as we await U.S. FDA approval of MiniMed 530G and unfavorable foreign currency
translation. Additionally, in the back half of fiscal year 2013 we deferred $23 million of revenue in the U.S. as we plan to convert
some of the recently sold pumps to the new technology once it is approved.
36