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Table of Contents
47
• Ability to generate product innovation and adoption of less invasive surgical techniques to help patients recover
faster and at less overall cost to the healthcare system. Opportunities exist to provide advanced solutions that
minimize complications and increase efficiency. Our goal is to create localized solutions to improve surgical
approaches and increase access to care, address economic and clinical challenges, and advance minimally
invasive surgery by minimizing complications, thereby reducing surgical variability and increasing efficiency.
• Continued and future acceptance of the Valleylab FT10 energy platform, which we launched in fiscal year
2016. The faster sealing of the Valleylab FT10 decreases procedure times and auto-adjusting energy
accommodates different tissue types.
Restorative Therapies Group The Restorative Therapies Group includes products for various areas of the spine, bone graft
substitutes, biologic products, trauma, implantable neurostimulation therapies and drug delivery systems for the treatment of
chronic pain, movement disorders, obsessive-compulsive disorder (OCD), overactive bladder, urinary retention, fecal incontinence
and gastroparesis, products to treat conditions of the ear, nose, and throat, and systems that incorporate advanced energy surgical
instruments. Additionally, this group manufactures and sells image-guided surgery and intra-operative imaging systems. With the
addition of the Neurovascular division through the January 2015 Covidien acquisition, the group manufactures and markets
products and therapies to treat diseases of the vasculature in and around the brain and includes sales of coils, neurovascular stents
and flow diversion products. The Restorative Therapies Group’s net sales for fiscal year 2016 were $7.2 billion, an increase of 7
percent over the prior fiscal year. Currency translation had an unfavorable impact on net sales of approximately $244 million as
a result of the change in exchange rates from the prior year. The Restorative Therapies Group's performance was favorably impacted
by an additional selling week during the first quarter of fiscal year 2016. The Restorative Therapies Group’s performance for fiscal
year 2016 was favorably impacted by the addition of the Neurovascular division, growth in Surgical Technologies, and by an
additional selling week during the first quarter of fiscal 2016, partially offset by declines in Neuromodulation and Spine. See the
more detailed discussion of each business's performance below.
Spine net sales for fiscal year 2016 were $2.9 billion, a decrease of 2 percent over the prior fiscal year. The decrease in Spine net
sales was driven by declines in Core Spine and Interventional, partially offset by growth in BMP (composed of INFUSE bone
graft (InductOs in the E.U.)) in the U.S. The U.S. Core Spine market grew in the low-single digits, with modest procedural growth
offset by continued pricing pressures. During fiscal year 2016, new product introductions across several procedures, resulted in
a sequential improvement in the Core Spine growth rate. We are seeing incremental revenue from our differentiated OLIF
procedures, as well as from the recent Solera, Voyager, Elevate, and PTC Interbody launches for TLIF and MIDLF procedures.
In Core Spine, we are also realizing some early benefits from our Speed to Scale initiative, which accelerates innovation and
enables rapid deployment of these products and procedures to the market. The Interventional Spine net sales decline was driven
by continued pricing pressures. In BMP, strong growth in the U.S. was offset by declines in international BMP due to the InductOs
stop shipment in Europe which we expect to continue until the back half of fiscal year 2017.
Neuromodulation net sales for fiscal year 2016 were $1.9 billion, a decrease of 3 percent over the prior fiscal year. The decrease
in net sales was primarily due to challenges in Drug Pumps and Pain Stimulation, partially offset by growth in Gastro/Uro, with
relatively flat results in DBS. In Drug Pumps, the business was negatively affected by challenges related to its April 2015 U.S.
FDA consent decree, as well as the January divestiture of its intrathecal baclofen drug. In Pain Stimulation and DBS, declines
were driven by increased competition in the market, however, drivers such as the expanded early onset DBS indication in the U.S.
that we received earlier this fiscal year and new strategies that focus our pain products on the growing opioid epidemic could
improve future results. In Gastro/Uro, implant growth of our InterStim Therapy for overactive bladder, urinary retention, and
bowel incontinence continued in the U.S. during fiscal year 2016.
Surgical Technologies net sales for fiscal year 2016 were $1.8 billion, an increase of 6 percent over the prior fiscal year. The
increase in net sales was driven by continued worldwide net sales growth across the portfolio of Advanced Energy, ENT, and
Neurosurgery. Performance was driven by strong growth of power systems, Aquamantys Transcollation, and PEAK PlasmaBlade
technologies, as well as solid growth of Midas Rex products, monitoring, and O-arm imaging systems.
Neurovascular net sales for fiscal year 2016 were $587 million. The division contributed revenue from the strength of its coils,
stents, flow diversion, and access product lines. Our Solitaire FR mechanical thrombectomy device delivered strong results,
solidifying our leadership position in the rapidly expanding ischemic stroke market. Our Flow Diversion products for the treatment
of intracranial aneurysms, Pipeline Flex in the U.S. and Japan and Pipeline Shield in Europe, continue to lead the market.
Spine net sales for fiscal year 2015 were $3.0 billion, a decrease of 2 percent over the prior fiscal year. The decrease in Spine's
net sales for fiscal year 2015 was driven by declines in Core Spine and Interventional, partially offset by growth in BMP. Both
the global and U.S. Core Spine markets grew in the low-single digits, with modest procedural growth offset by continued pricing
pressures. During fiscal year 2015, the Core Spine business continued to focus on differentiating itself over the long-term through
portfolio updates, procedural innovation, and continued development and deployment of the its Surgical Synergy program that