Medtronic 2014 Annual Report Download - page 2

Dear Shareholder,
As I complete my third year as CEO of Medtronic, we have made measurable progress in the areas that were identified as the
most pressing priorities for the company in May 2011: improving execution, accelerating globalization, and improving
productivity. Furthermore, we have established a consistent and realistic strategy for the future that appeals to customers,
investors, and employees. The key elements of this strategy are:
•Delivering consistent operational execution
•Expanding market leadership through therapy innovation
•Increasing access to existing therapies through globalization, especially in emerging markets
•Leading the transformation to a value-based healthcare company, leveraging the economic value of our products and
services
•Enhancing shareholder value through best-in-class financial performance
FY14 Results
In FY14 we delivered solid results, while facing many challenges. Overall, we met investor expectations, finishing in the middle
of our guidance range. There were some significant accomplishments during the year, which have created a growth platform for
FY15 and beyond.
In our Diabetes business, the MiniMed®530G with Enlite®CGM sensor gained considerable momentum as the first and only
system that automatically stops insulin delivery if glucose levels fall below a predetermined threshold. Both Bone
Morphogenetic Protein (BMP) and Balloon Kyphoplasty (BKP) in our Spine business, which have had declining sales, have
shown sequential stability over multiple quarters. Our Surgical Technologies business continued its growth momentum,
delivering 12 consecutive quarters of double-digit growth.
We launched the Reveal LINQ™insertable cardiac monitor that is 87 percent smaller than our previous device and has been
accepted enthusiastically by the marketplace. Our U.S. launch of the self-expanding transcatheter CoreValve®System, brought
to market a differentiated therapy for severe aortic stenosis patients who are too ill or frail to have their aortic valves replaced
through traditional open-heart surgery. Most importantly, the results of landmark clinical trials with our transcatheter aortic
valve and drug coated balloon products yielded groundbreaking results and are on the verge of creating major $1 billion
markets.
We continue to be excited about future opportunities around new therapies, including our strong R&D investment in more than
200 projects that will lead to a cadence of product launches and innovations across the breadth of our businesses. We estimate
this investment will generate more than $30 billion in incremental revenue over the next five years.
In globalization, we continue to make progress with emerging markets contributing 13 percent of our total revenue by the end of
FY14. There were several highlights in the past year: Middle East and Africa delivered noticeable results, growing 24 percent
on a constant currency basis* (17 percent as reported); we converted to direct sales in Turkey, one of our major markets in the
region and have a solid multi-year plan for extending direct sales capability virtually across the entire region; and China grew 13
percent on a constant currency basis* (15 percent as reported), outperforming the broader medtech market.
We recognize, however, that emerging markets are still performing short of their potential. We remain confident about our long-
term outlook and are building a robust growth platform for the future. This is based on aggressive investment in field resources,
building direct distribution capabilities, and structuring major provider and government partnerships. Examples include our
Healthy Heart for All program, which has built patient awareness and referral chains to improve patient access to cardiac
therapies. The program combines market development and business model innovation through private hospital partnerships.
Another highlight was the announcement of our hemodialysis product development in India, a product that will improve
treatment quality, lower costs, and dramatically increase access. For the latter, we are working closely with Apollo Hospitals,
and the program represents our first therapy to be developed and launched in the emerging markets. A good example of our
efforts to reach underserved populations in India is our Shruti program, which is an innovative business model addressing the
problem of disabling hearing loss. This program educates community health workers to detect and treat hearing conditions, and
gives them simple, innovative mobile technology to help diagnose ear problems.
* See reconciliation of non-GAAP financial measures following this Shareholder Letter.