J.P. MORGAN HEALTHCARE CONFERENCE - 38TH ANNUAL - OMAR ISHRAK - Medtronic Investor ...
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38 ANNUAL TH J.P. MORGAN HEALTHCARE CONFERENCE JANUARY 13, 2020 SAN FRANCISCO OMAR ISHRAK CHAIRMAN & CEO
FORWARD LOOKING STATEMENTS This presentation contains forward-looking statements. They are based on current assumptions and expectations that involve uncertainties or risks. These uncertainties and risks include, but are not limited to, those described in the filings we make with the U.S. Securities and Exchange Commission (SEC). Actual results may differ materially from anticipated results. Forward-looking statements are made as of today's date, and we undertake no duty to update them or any of the information contained in this presentation. Non-GAAP Financial Measures Certain information in this presentation includes calculations or figures that have been prepared internally and have not been reviewed or audited by our independent registered public accounting firm. Use of different methods for preparing, calculating or presenting information may lead to differences and such differences may be material. This presentation contains financial measures and guidance which are considered “non-GAAP” financial measures under applicable SEC rules and regulations. Medtronic management believes that non-GAAP financial measures provide information useful to investors in understanding the company’s underlying operational performance and trends and to facilitate comparisons with the performance of other companies in the med tech industry. Medtronic calculates forward-looking non-GAAP financial measures based on internal forecasts that omit certain amounts that would be included in GAAP financial measures. For instance, forward-looking organic revenue growth guidance excludes the impact of foreign currency fluctuations, as well as material acquisitions or divestitures. Forward-looking diluted non-GAAP EPS projections exclude potential charges or gains that would be recorded as non-GAAP adjustments to earnings during the fiscal year. Medtronic does not attempt to provide reconciliations of forward-looking non-GAAP EPS guidance to projected GAAP EPS guidance, because the combined impact and timing of recognition of these potential charges or gains is inherently uncertain and difficult to predict, and is unavailable without unreasonable efforts. In addition, we believe such reconciliations would imply a degree of precision and certainty that could be confusing to investors. Such items could have a substantial impact on GAAP measures of financial performance. GAAP to non-GAAP reconciliations can be found attached to this presentation. Financial Comparisons References to results increasing, decreasing, or remaining flat in a particular fiscal period are in comparison to the corresponding period in the prior fiscal year. References to organic revenue growth exclude the impact of material acquisitions and currency. Unless stated otherwise, quarterly and annual rates and ranges are given on a constant currency basis, which adjusts for the impact of currency. 2 38th Annual J.P. Morgan Healthcare Conference | January 13, 2020
THE WORLD’S LEADING MEDICAL TECHNOLOGY COMPANY
WITH A MISSION TO ALLEVIATE PAIN, RESTORE HEALTH AND EXTEND LIFE
75 OPERATE IN
$2.3B R&D SPEND
IN FY19
$30.6 FY19
TOTAL
MILLION+ 150+ BILLION REVENUE
LIVES IMPROVED
IN FY19 COUNTRIES $480M+ CLINICAL INVESTMENTS
IN FY19
Diabetes Group
$2.4B
Restorative Cardiac &
$11.5B Vascular
OUR GLOBAL PRESENCE
300+ CLINICAL TRIALS
IN FY19
Therapies $8.2B
Group Group
$8.5B
EUROPE, MIDDLE EAST, & AFRICA
47,000+ PATENTS
IN OUR PORTFOLIO
Minimally Invasive
Therapies Group
Emerging Markets
GREATER
90,000 11,200+
CHINA $4.7B
AMERICAS United
States
$16.2B
EMPLOYEES CLINICAL PROFESSIONALS $9.6B
ASIA PACIFIC SCIENTISTS Non-US
ENGINEERS Developed
1 Organic Y/Y growth.
2 Non-GAAP. Pro Forma Y/Y growth. Q2 through Q4 FY18 and Q1 FY19 adjusted to exclude the PMR divestiture in baseline.
3 38th Annual J.P. Morgan Healthcare Conference | January 13, 2020
MEDTRONIC: TECHNOLOGY TO CREATE SHAREHOLDER VALUE
ROBUST PIPELINE, STRONG RETURNS & CONSISTENT EXECUTION
• Leading medical technology pipeline with significant
product launches over next few quarters and beyond
• Management focused on sustainably accelerating
ROBUST
revenue growth
PIPELINE
• Growth from pipeline enhanced by Emerging Markets,
where our local presence and scale is delivering
consistent, strong growth
• Strong free cash flow conversion and balance sheet
enables reinvestment and return to shareholders
STRONG
RETURNS • Generating robust total shareholder returns with an
8% EPS growth target over planning period and
strong, growing dividend
FOCUSED ON CONSISTENT EXECUTION TO DELIVER ON OUR COMMITTMENTS
4 38th Annual J.P. Morgan Healthcare Conference | January 13, 2020
MEDTRONIC WILL BE THE INDUSTRY LEADER IN TECHNOLOGY
THROUGH CONTINUOUS INNOVATION, INVENTION AND DISRUPTION
Definition Examples
Reveal LINQ™ 2.0
CONTINUOUS Enhancing the clinical
outcomes and economic
INNOVATION value of existing products
Cobalt / Crome
Family of ICDs and Evolut® PRO+ Valve Intellis™ StealthStation™ S8 Signia™ Surgical
Solitaire™ X
CRT-Ds Stapling
Creating and developing
INVENTION new therapies that result
in new markets
Symplicity™ PillCam™
Intrepid™ Fully-Implantable
Renal Denervation Genius
TMVR LVAD
Robotic Assisted Portable
Surgery Platform Hemodialysis
DISRUPTION
Disruptive therapies in
existing markets DiamondTemp™
Extended Wear
RF Ablation
Personalized Infusion Set
System
Closed Loop Percept™ PC
Micra™ AV Transcatheter
Deep Brain
Pacing System
Stimulator
5 38th Annual J.P. Morgan Healthcare Conference | January 13, 2020
ROBUST PIPELINE
LEADING PIPELINE OF TECHNOLOGY
WEIGHTED TO GROWTH MARKETS
DRIVING GROWTH NOW JUST LAUNCHING / EXPECT IN BEYOND
NEXT FEW QUARTERS
CVG
Arctic Front Micra™ VR VenaSeal™ DCB AV Micra™ AV DiamondTemp™ Symplicity™ Pulsed
Low Risk TAVR Evolut® Reveal Extravascular Intrepid® Mitral
Advance™ Transcatheter Closure Access Transcatheter RF Ablation Renal Field
Indication PRO+ Valve LINQ™ 2.0 ICD (EV-ICD) Valve Replacement
Cryoballoon Pacing System System Indication Pacing System System (Europe) Denervation Ablation
Portable
MITG
Hemodialysis
Signia™ LigaSure™ PillCam™ System
Powered Vessel PillCam™ Sonicision™ Genius
Stapler Sealing INVOS™ 7100 Platform Update Robotic Assisted Surgery Platform
RTG
InterStim™ Hemorrhagic
DTM™ Micro & Percept™ Next Gen Pipeline™ Stroke Closed Loop Next-Gen
Riptide™ Aspiration InterStim™ Vantage with Deep Brain Spine Enabling
Titan™ Spine SCS PC NIM® Intrasaccular Stimulator
System with Solitaire™ X SureScan™ Deep Brain Shield Technologies
Spine Enabling Therapy on Nerve Device
React™ 71 Catheter Intellis™ MRI leads Stimulator Monitoring Technology™
Technologies Flow Diverter
Platform System
DIABETES
(Europe)
Minimed® 780G
MiniMed®670G Extended Wear Zeus CGM Sensor Personalized Synergy™ CGM
Guardian Connect® Standalone Advanced Hybrid
(US & OUS) Infusion Set Closed Loop Sensor
Sensor (US & OUS) Closed-Loop System
7 38th Annual J.P. Morgan Healthcare Conference | January 13, 2020
ROBUST PIPELINE: STRUCTURAL HEART
TAVR AND TMVR
▪ Recent growth acceleration in TAVR:
▪ Evolut® Pro Plus launching now: lowest delivery profile on
the market; external wrap for advanced sealing across all
valve sizes
▪ Low Risk indication expansion
▪ Expansion of US TAVR centers
▪ Expecting Bicuspid data at ACC in March
▪ Bicuspids are ~60% of low risk patient population in US,
current precaution for this population on US label
▪ Enrolling APOLLO, our US mitral replacement pivotal
trial of our Intrepid™ valve
▪ Activating sites now for transfemoral delivery system
feasibility trial
8 38th Annual J.P. Morgan Healthcare Conference | January 13, 2020
ROBUST PIPELINE: CORE SPINE AND NEUROSURGERY
SPINE ENABLING TECHNOLOGIES
▪ Gaining share in Spine by combining enabling
technologies with our spine implants
▪ Mazor X Stealth™ Edition robotics
▪ O-arm™ imaging
▪ StealthStation™ S8 navigation
▪ Midas Rex™ MR8™ powered surgical instruments
▪ Led to highest organic growth in our Spine business in
2.5 years last quarter
▪ Still in early stages of adoption and technological
advancement
▪ Pipeline of innovation ahead of us that will expand our
capabilities in Spine robotics
9 38th Annual J.P. Morgan Healthcare Conference | January 13, 2020
ROBUST PIPELINE: SURGICAL INNOVATIONS
ROBOTIC ASSISTED SURGERY PLATFORM
▪ Builds upon our decades of leadership, innovation, and
expertise in minimally invasive surgery, dating back to
U.S. Surgical
▪ Highly underpenetrated market, due to cost and
utilization barriers
▪ Our system designed to increase robotic utilization
with a per-procedure cost comparable to laparoscopy
▪ Embarking on global launch sequence; on track for
regulatory milestones
▪ Expected to be significant incremental contributor to
MITG growth over the coming years, with minor impact
in FY21 (ROBUST PIPELINE: DIABETES
MINIMED™ 780G ADVANCED HYBRID CLOSED LOOP SYSTEM
▪ Bluetooth connectivity for caregiver alerts and
wireless/over-the-air software upgrades
▪ Auto correction bolusing for simplified meal
management and hyperglycemia protection
▪ Algorithm can target 100 mg/dL night and day
▪ Data from 3 adult feasibility studies indicating time-in-
range (TIR) of approximately 80%
▪ Use case data under extreme conditions to be
presented at ATTD in February; US pivotal trial
presentation expected at ADA in June
▪ CE Mark dossier submitted; FDA submission
forthcoming
11 38th Annual J.P. Morgan Healthcare Conference | January 13, 2020ROBUST PIPELINE: BRAIN MODULATION
PERCEPT™ DEEP BRAIN STIMULATION SYSTEM
▪ The first DBS device that enables the sensing of brain
signals using proprietary BrainSense™ technology
▪ Allows for more data-driven, personalized stimulation
for patients
▪ Software upgradable platform allows for continued
innovation and improved treatments over time,
including eventual closed loop system
▪ Only 3T full body MRI conditional system on the market
▪ Improved battery longevity
▪ Just received CE Mark; beginning Western European
launch this month
▪ Expect Spring US FDA approval and launch
12 38th Annual J.P. Morgan Healthcare Conference | January 13, 2020ROBUST PIPELINE: PELVIC HEALTH
INTERSTIM™ MICRO & INTERSTIM™ SURESCAN™ MRI LEADS
▪ Treats overactive bladder (OAB), fecal incontinence
(FI) and non-obstructive urinary retention
▪ Dramatic 80% size reduction. 3cc vs. 14cc on current
device; will be the smallest sacral nerve stimulation
device in the market
▪ Features MDT proprietary Overdrive™ rechargeable
battery technology; expect 15 year battery longevity
with virtually no loss in capacity over time
▪ SureScan™ leads: 1.5 and 3T full-body MRI conditional;
will be used with InterStim™ Micro and future implants
of InterStim™ II
▪ Just received CE Mark; beginning European launch this
month
▪ Awaiting US FDA approval and launch
13 38th Annual J.P. Morgan Healthcare Conference | January 13, 2020ROBUST PIPELINE: PACING
MICRA™ AV TRANSCATHETER PACING SYSTEM
▪ One-tenth the size of traditional pacemaker, without
the need for leads
▪ Expands Micra target population from ~15% to ~55%
of pacemaker patients, driving market expansion and
share gains
▪ MARVEL 2 data presented at AHA and published in
JACC: Clinical Electrophysiology; demonstrated
significant improvement in synchrony and cardiac
function in AV block patients
▪ Builds upon success of Micra VR, which has driven ~20
points of increased unit share and ~35 points of
increased revenue share in US single chamber
pacemaker market
▪ Expect US FDA approval before end of FY20
14 38th Annual J.P. Morgan Healthcare Conference | January 13, 2020ROBUST PIPELINE: ATRIAL FIBRILLATION SOLUTIONS
DIAMONDTEMP™ ABLATION SYSTEM
▪ Disruptive technology in the $6 billion EP ablation
market; this adds an RF catheter to our portfolio in the
multi-billion dollar advanced focal category
▪ Unique, real-time, irrigated catheter uses closed-loop
temperature control enabled diamond inserts for
thermal management
▪ Enables improved feedback and greater control during
the ablation procedure
▪ Have CE Mark; Launch in Europe in fiscal fourth quarter
▪ US FDA approval expected in H2 FY21
15 38th Annual J.P. Morgan Healthcare Conference | January 13, 2020ROBUST PIPELINE: RENAL DENERVATION
SYMPLICITY™ RENAL DENERVATION SYSTEM
▪ Multi-billion dollar opportunity to treat hypertension
through a one-time, minimally invasive, catheter-
based ablation procedure that is “always on”
▪ Two successful feasibility studies (SPYRAL HTN-OFF
MED & SPYRAL HTN-ON MED) published in The Lancet
▪ Currently running two studies, SPYRAL HTN Pivotal
and SPYRAL HTN-ON MED, both prospectively
powered, randomized, sham-controlled studies
evaluating patients with uncontrolled blood pressure in
the absence and presence of prescribed anti-
hypertensive medications, respectively
▪ Potential presentation of SPYRAL HTN Pivotal at ACC
in March, depending on Bayesian analysis
16 38th Annual J.P. Morgan Healthcare Conference | January 13, 2020EMERGING MARKETS: ENHANCES OUR GROWTH PROFILE
SUPPORTED BY MARKET DIVERSIFICATION AND DIFFERENTIATED STRATEGIES
Consistent Double Digit Growth Differentiated Strategies
Y/Y CCCW Revenue Growth1
15% 15% ▪ Enhanced direct presence
Channel ▪ Well-aligned distribution
% of Total Medtronic
10% 10%
Optimization partners
5% 5%
0% 0% ▪ Regulatory
FY15 FY16 FY17 FY18 FY19 1H20
Functional
▪ Government affairs
Market Diversification Capabilities
Other India
Asia ~5% FY19 Revenue:
~5% $4.7 Billion
Central & ▪ Local manufacturing
Eastern EU
~10% Greater
China
Localization ▪ Innovation incubators
~40%
Latin
America ▪ Training centers
~20%
Middle East &
Africa ~20%
1 CCCW – Represents growth on a comparable constant currency, constant week basis.
17 38th Annual J.P. Morgan Healthcare Conference | January 13, 2020STRONG RETURNS
STRONG RETURNS: FREE CASH FLOW1
COMMITTED TO DELIVERING STRONG FREE CASH FLOW CONVERSION
FCF1 IMPROVEMENTS SUCCESSFUL EMPLOYEE ENGAGEMENT PROGRAMS
AHEAD OF SCHEDULE DRIVING IMPROVEMENT
FY19 83% FCF Conversion2; WORKING ONE-TIME TOTAL MDT
$7B
$7 Above Peer Average CAPITAL ITEMS FOCUS
$6B
$6 Driving working Keen focus on Company-wide
$5B $5.9B capital reducing one-time incentives aligned
$5
improvement; items through with shareholders
$4B
$4 moving away from diligent tracking &
$3B consistent use of accountability
$3 $3.6B cash
$2B
$2
EXCEEDED
$1B
80%
$1
$0B
$0
In Year 1
Conversion Ratio2 Target
1-2 years ahead of schedule
1 Operating cash flow less property, plant equipment additions
2 Conversion Ratio = Free Cash Flow divided by Non-GAAP Net Income
19 38th Annual J.P. Morgan Healthcare Conference | January 13, 2020STRONG RETURNS: CAPITAL ALLOCATION
FIREPOWER TO INVEST AND RETURN TO SHAREHOLDERS
FY15 – FY19
ORGANIC Incrementally investing in
product pipeline to sustain ~$16B1
ROIC
INVESTMENT
REINVESTMENT growth and profitability
Target of 13%
Increasing focus; Ensuring
deals are a strong, strategic • Organic reinvestment is
TUCK-IN M&A fit and meet financial return ~$6B2 highest and best
metrics returning use of capital
In line with earnings growth • Focused on ensuring
(MINIMUM 50% OF FCF)
DIVIDEND inorganic opportunities
SHAREHOLDERS
Target dividend payout ~$11B
GROWTH enhance ROIC profile
RETURN TO
ratio of 40%
• Embedded in
Opportunistic share management long-term
SHARE incentive plans
repurchases to augment ~ $10B3
REPURCHASES shareholder returns
1 Includes R&D and capital expenditures
2 Includes acquisitions and strategic investments post FY15 COV acquisition
20 3 Share repurchases net of issuances 38th Annual J.P. Morgan Healthcare Conference | January 13, 202042 YEARS OF INCREASING DIVIDEND
DIVIDEND EXPECTED TO GROW IN-LINE WITH EARNINGS GROWTH
17% Dividend per Share CAGR over 42 Year History
Dividend Payout Ratio1
$2.50 50%
Dividend per Share
$2.25
45%
$2.00
Dividend Payout Ratio1
Dividend per Share
$1.75 40%
$1.50 35%
$1.25
$1.00 30%
$0.75 25%
$0.50
20%
$0.25
$0.00 15%
Member of S&P 500 Dividend Aristocrats
1 Annual dividend per share divided by prior year non-GAAP diluted earnings per share.
21 38th Annual J.P. Morgan Healthcare Conference | January 13, 2020FOCUSED ON DELIVERING ROBUST TOTAL SHAREHOLDER RETURN
DRIVEN BY CONSISTENT LONG-TERM EPS GROWTH
REVENUE
GROWTH
TARGET DOUBLE DIGIT
OPERATING
LEVERAGE
8% TOTAL SHAREHOLDER
ADJUSTED EPS GROWTH RETURN
OVER PLANNING PERIOD1 (EPS Growth + Dividend Yield)
FINANCIAL
LEVERAGE
1 Non-GAAP basis. Assumes modest currency volatility.
22 38th Annual J.P. Morgan Healthcare Conference | January 13, 2020MANAGEMENT INCENTIVES ALIGNED WITH SHAREHOLDERS
INCREASED FOCUS ON ROIC, FREE CASH FLOW, AND TOTAL SHAREHOLDER RETURN
Compensation Mix FY20 Annual Incentives Long-Term
Performance Plan
Individual Contributors Managers Executives CEO
90%
1/3 1/3 1/3 1/3
FCF Revenue TSR1 ROIC2
1/3 1/3
EPS Revenue
10%
1 Relative Total Shareholder Return (TSR) = (End Average Share Price x Dividend Re-Investment Factor) / Start Average Share Price.
2 Return On Invested Capital = Non-GAAP Net Income after removal of after-tax impact of amortization plus interest expense net of tax / Invested Capital. Invested
Capital is Total Equity plus interest bearing liabilities less cash and cash equivalents.
23 38th Annual J.P. Morgan Healthcare Conference | January 13, 2020MEDTRONIC: TECHNOLOGY TO CREATE SHAREHOLDER VALUE
ROBUST PIPELINE, STRONG RETURNS & CONSISTENT EXECUTION
• Leading medical technology pipeline with significant
product launches over next few quarters and beyond
• Management focused on sustainably accelerating
ROBUST
revenue growth
PIPELINE
• Growth from pipeline enhanced by Emerging Markets,
where our local presence and scale is delivering
consistent, strong growth
• Strong free cash flow conversion and balance sheet
enables reinvestment and return to shareholders
STRONG
RETURNS • Generating robust total shareholder returns with an
8% EPS growth target over planning period and
strong, growing dividend
FOCUSED ON CONSISTENT EXECUTION TO DELIVER ON OUR COMMITTMENTS
24 38th Annual J.P. Morgan Healthcare Conference | January 13, 202038 ANNUAL TH J.P. MORGAN HEALTHCARE CONFERENCE JANUARY 13, 2020 SAN FRANCISCO OMAR ISHRAK CHAIRMAN & CEO
NON-GAAP RECONCILIATIONS
FREE CASH FLOW 27 38th Annual J.P. Morgan Healthcare Conference | January 13, 2020
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