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MORGAN STANLEY

GLOBAL HEALTHCARE CONFERENCE


September 13, 2016

OMAR ISHRAK
CHAIRMAN & CHIEF EXECUTIVE OFFICER

KAREN PARKHILL
EVP & CHIEF FINANCIAL OFFICER
RYAN WEISPFENNING
VICE PRESIDENT, INVESTOR RELATIONS
ryan.weispfenning@medtronic.com

FORWARD LOOKING STATEMENT


This presentation contains forward-looking statements which provide current expectations or forecasts,
including those relating to market and sales growth, growth strategies, financial results, use of capital, product
development
and
introduction,
partnerships,
regulatory
matters,
restructuring
initiatives,
mergers/acquisitions/divestitures and related effects, accounting estimates, financing activities, working capital
adequacy, competitive strengths and sales efforts. 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.

Financial Data
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, including free cash flow figures (defined as
operating cash flows less property, plant and equipment additions), revenue and growth rates on a constant
currency and constant weeks basis, and constant currency growth rates, net income, and diluted EPS, all of which
are considered non-GAAP financial measures under applicable SEC rules and regulations. We believe these
measures provide a useful way to evaluate our underlying performance. Detail concerning how all non-GAAP
measures are calculated, including all GAAP to non-GAAP reconciliations, are included at the end of this
presentation.

Morgan Stanley Global Healthcare Conference | September 13, 2016

WHY INVEST IN MEDTRONIC?


Next 5 Years

Medtronic
Differentiators
Medtronic
Differentiators

Innovation

Size / Scale

$40B
Free Cash Flow

Profitability

Cash
Accessibility

Disciplined
Allocator

Return to Shareholders

$10B

M&A and Debt Reduction

Next 5 Years
Returns
Focused

Consistency
3

$20B

$10B

Financial Flexibility
Morgan Stanley Global Healthcare Conference | September 13, 2016

GLOBAL HEALTHCARE LEADER WITH DIFFERENTIATED PLATFORMS


POSITIONED TO DELIVER ATTRACTIVE SHAREHOLDER RETURNS
1

REVENUE GROWTH

MARGIN EXPANSION

Unmatched pipeline and attractive, diversified


markets lead to consistent, sustainable
mid-single digit constant currency revenue growth

Utilizing systems and structure at scale across the


enterprise to drive margin expansion

FREE CASH FLOW

CAPITAL DEPLOYMENT

Strong revenue growth and high profitability


generates significant and increasingly accessible
free cash flow

EPS GROWTH

Deploying massive amounts of capital


strategically, consistently, and with discipline

EPS GROWTH
Committed to consistently
delivering strong double
digit constant currency EPS growth
Committed to delivering consistent double digit
constant currency EPS growth

TOTAL SHAREHOLDER RETURN


Overall performance results in low-double digit to
mid-teens total shareholder return

Free cash flow (FCF) defined as operating cash flow, less capital expenditures
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Morgan Stanley Global Healthcare Conference | September 13, 2016

FOCUSED LONG-TERM COMMITMENTS DRIVING SHAREHOLDER VALUE


EXECUTING ON A BROAD, SUSTAINABLE GROWTH PLATFORM
Consistent Commitments

REVENUE
GROWTH

Robust innovation pipeline,


geographic reach, and new
healthcare business models to
sustain consistent and reliable
above-market revenue growth

EPS
LEVERAGE

Multiple operating and financial


leverage levers to deliver
consistent and reliable doubledigit earnings per share growth

CAPITAL
ALLOCATION

Strategic capital deployment


prioritizing disciplined M&A and
substantial cash returns to
shareholders

MID-SINGLE DIGIT
CONSTANT CURRENCY REVENUE GROWTH

DOUBLE-DIGIT
CONSTANT CURRENCY EPS GROWTH

>50 PERCENT
RETURNED TO SHAREHOLDERS

Morgan Stanley Global Healthcare Conference | September 13, 2016

EXECUTED ON LARGEST ACQUISITION IN MEDTECH HISTORY


Delivering on Commitments Made at Deal Announcement
Preserving and accelerating

Preserve
Maintaining business
momentum at both
companies while
delivering consecutive
quarters of strong
business performance.

core strategies: Therapy


Innovation, Globalization &
Economic Value
Offering a more
comprehensive and
competitive growth platform
Diversifying revenue mix

Optimize
Integrating the best of
our systems, policies
and facilities
reinventing ourselves to
achieve global growth
and savings.

Capturing operational
synergies

Accretive to FY16 cash EPS


and significantly accretive
thereafter

Increasing access to capital


and optimizing shareholder
returns through deployment
flexibility

Accelerate
Realizing synergy
opportunities for
Covidiens Peripheral
Vascular and
Neurovascular divisions.
Increasing capital
deployment and access to
trapped cash.

Morgan Stanley Global Healthcare Conference | September 13, 2016

Transform
Delivering higher
value in healthcare.
Aligning solutions to
emerging value-based
payment models.
Partnering with new
stakeholders.

MARGIN EXPANSION
Utilizing systems and
structures at scale across
the enterprise to drive
margin expansion

Covidien
Synergies

Operating leverage of low to

COGS
Reduction

Operating Leverage
Low to Mid-Single Digits

mid-single digits contributes to


double-digit EPS growth
expectation

~500-650 bps of CC operating

margin improvement over next


5 years

G&A Leverage

On track to deliver minimum of


$850M in COV synergies

COV synergies catalyst for long


tail of leverage opportunities
beyond FY18

Morgan Stanley Global Healthcare Conference | September 13, 2016

STRONG OPERATING LEVERAGE IN LIGHT OF SIGNIFICANT FX PRESSURE


FY15-FY17 OPERATING MARGIN WALK
~130
210 bps
30.0%

~(110)
(130) bps

~100 bps (120 bps)


29.0%

~(20) bps
28.0%

28.4%

28.2%

27.0%

26.0%

25.0%
FY15

OM
Improvement

FX

FY16

Extra Week

OM
Improvement

FX

FY17E

Delivering strong CC operating leverage: ~230 310 bps of improvement,


excluding the extra week impact

FX significantly dilutes operational performance (given current rates)


Operating margins on a non-GAAP basis
8

Morgan Stanley Global Healthcare Conference | September 13, 2016

COVIDIEN SYNERGIES: DELIVERING ON OUR COMMITMENTS


FY16-FY18
FY16

FY17E

~$355M

$225-250M

Total

FY18E

>$850M

$250-275M

Sourcing ~$300M
Shared supplier rationalization

Freight reductions through common contracts

Value engineering & make vs. buy

SG&A
1

CVG ~$60M

Supply Chain Optimization ~$65M

Manufacturing ~$5M

Peripheral Vascular
integration

Integrated transportation and logistics &


distribution center footprint

Plant network

Enabling Functions ~$240M


Elimination of redundant roles / expenses
(FIN, Legal, HR, IT, Comm.)

Functional Delivery Model Evolution ~$130M


Service delivery optimization: FIN & HR centers of excel. / shared serv.
improve CLIN study mgmt process, commercial back office

~$600M

COGS
~$215M

Common ERP System (SAP) ~$10M


Enables significant savings in
Enabling Functions and Functional Delivery Model Evolution

Benefits Harmonization
~($50)-(70)M Impact
Non-Operations Facilities ~$100M
Consolidation of >100 facilities globally (sales offices, corporate offices, back offices)
Manufacturing / Plant network optimization will result in significant future savings
9

Morgan Stanley Global Healthcare Conference | September 13, 2016

R&D
~$35M

STRONG UNDERLYING LEVERAGE BEYOND COVIDIEN SYNERGIES


FY17-FY21 OPERATING MARGIN WALK
Next Five Years: ~500-650 bps of Operating Margin Improvement CC

35.0%
34.0%

~70
140 bps

33.0%

~70
140 bps

32.0%
31.0%
30.0%

~50
100 bps

~70
140 bps

~130
210 bps

29.0%
28.0%
27.0%
FY17E

Lev.

Other

COV Synergies

~$355M in FY16
~$225M-$250M in FY17E
~$250M-$275M in FY18E

FY18E

Lev.

Underlying SG&A

Functional delivery model


Ongoing G&A leverage

Other

FY19E

Lev.

Underlying GM Improvement

Assumes ~150-200 bps


pricing pressure

Ongoing COGS reduction


Sourcing
Manufacturing
Supply Chain

FY17E operating margin includes the impact of FX, but shows CC leverage
Operating Margin on constant currency basis for FY17-FY21
10 Underlying GM improvement net of ASP reduction
Morgan Stanley Global Healthcare Conference | September 13, 2016

FY20E

Lev.

FY21E

Medtech Tax / Other

Assumes MedTech tax is


reinstated in FY18

Discretionary

Investments (e.g.: R&D,


inorganic)

CAPITAL DEPLOYMENT
Share
Repurchases
Free Cash Flow

Dividends
Debt Paydown

Balance Sheet
Cash

Deploying massive
amounts of capital
strategically, consistently,
and with discipline

M&A
Financial
Flexibility

11

Morgan Stanley Global Healthcare Conference | September 13, 2016

GENERATING SIGNIFICANT FREE CASH FLOW


FY17-FY21 FORECAST

Assumes accessible FCF ratio


increases from ~55% in FY16 to
>75% in FY21

~$40B FCF
High-single digit CAGR
Mid-teens accessible FCF CAGR

to generate ~$1.5B in
incremental FCF over next 5 yrs

5% Inventory Turn
improvement annually

1-2% DSO improvement


per year (focus on EM)

A/P: working to extend all

Billions ($)

10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0

Working capital improvements

suppliers to 60 days

~$1B of disciplined capital


expenditures per year

FY16-FY18 modestly higher


FY17E

FY18E

Trapped FCF

FY19E

FY20E

FY21E

to account for integration


costs (primarily IT)

Accessible FCF

Free cash flow (FCF) defined as operating cash flow, less capital expenditures
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Morgan Stanley Global Healthcare Conference | September 13, 2016

STRONG CASH POSITION


FY17-FY21E FORECAST

SOURCES OF CASH
~$13B of cash and investments currently on the
balance sheet

~$28B
Accessible
FCF

~$12B
Trapped
FCF

Untrapped ~$10B in FY16 following an internal


reorganization

Announced $5B in incremental share

repurchases by FY18, with bias towards


repurchasing shares earlier

~$2B
Trapped
B/S Cash

Targeted commitments to debt investors by the


end of FY18; ~$3B of debt prepaid (Q4 FY16)

Maintain financial flexibility

$3B
Puerto Rico
Resolution

IRS Puerto Rico litigation: ~$3B opportunity


USES OF CASH

~$8B
Accessible
B/S Cash

~$24B return to shareholders


Includes incremental share repurchases
Includes minimum 50% of FCF commitment
Debt paydown: ~$5-$6B
Targeting A credit profile
Financial flexibility increases as we free up cash

Outer ring: Sources of Cash


Inner circle: Uses of Cash

Free cash flow (FCF) defined as operating cash flow, less capital expenditures
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Morgan Stanley Global Healthcare Conference | September 13, 2016

IMPROVED PLATFORM FOR STRATEGIC M&A


$1.9B OF STRATEGIC M&A SINCE CLOSING COVIDIEN

Period of Tuck-In Acquisitions & Investments

3-5 Year Integration Event

Improved
Capital
Sustainability

FY17

FY16

FY15

OsteoCoolTM

Disciplined Investment Criteria

Meets Portfolio Criteria

Strengthens Strategic Priorities


Across Groups

14

Meets Financial Guidelines


Minimal to no
net EPS
dilution

Clear financial
value proposition

Revenue Growth
Adds ~50-100 bps

Target $1.5B
M&A / Year
EPS

Mid-teens riskadjusted return


hurdle

Neutral / Accretive

Morgan Stanley Global Healthcare Conference | September 13, 2016

Increased
Confidence
Double-Digit
EPS Growth

STRONG, CONSISTENT TRACK RECORD OF DIVIDEND GROWTH


INCREASED ACCESS TO CASH PROVIDES FLEXIBILITY
$3.00

50%

$2.75
$2.50

Dividend Payout Ratio now ~40%1


Dividend up +25% in FY16

$2.00
$1.75
$1.50
$1.25

Dividend per Share CAGR


5-year
11%
10-year
15%
20-year
17%
38-year
18%

40%
Recent
Large
Increases

$1.00

Payout Ratio1

$0.25

Dividend per Share

20%

FY79
FY80
FY81
FY82
FY83
FY84
FY85
FY86
FY87
FY88
FY89
FY90
FY91
FY92
FY93
FY94
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17E
FY18E
FY19E
FY20E
FY21E

$0.50

Member of S&P 500 Dividend Aristocrats


38 Years of Increasing Dividend per Share
1. On a non-GAAP basis. Calculated as annual dividend per share divided by prior year non-GAAP earnings per share.
15

30%
25%

$0.75

$0.00

35%

Morgan Stanley Global Healthcare Conference | September 13, 2016

15%

Payout Ratio

Dividend per Share

$2.25

45%

SHARE REPURCHASES: BASE ASSUMPTION


HELPS DRIVE FINANCIAL LEVERAGE
4.00

2.00
1,200

0.00

Shares (Millions)

Billions ($)

1,400

1,000
FY16

FY17E

FY18E

Base Share
Repurchases

FY19E

Incremental Share
Repurchases

FY20E

FY21E
Diluted Weighted
Shares Outstanding

Assumes minimum 50% return of FCF


$5B of incremental share repurchases in FY16-FY18 (result of ~$10B FY16 internal reorganization)
Robust ongoing base share repurchases; however, lower percentage of FCF in light of dividend
payout increase
Share repurchase figures reflect repurchase of ordinary shares net issuance of ordinary shares.
16

Morgan Stanley Global Healthcare Conference | September 13, 2016

DELEVERAGING THE BALANCE SHEET


Gross Debt to EBITDA

3.8x

Assumes ~$9B of gross debt


repayment, FY16-FY18E

~2.5X
FY19-FY21E

~2.5X

Reflects ~$3B of debt prepaid in Q4


FY16

Assumes an additional $5-$6B in


FY17-FY18E

Continue to target A-credit profile


FY16

17

FY17E

FY18E

Morgan Stanley Global Healthcare Conference | September 13, 2016

REVENUE GROWTH
Universal Healthcare Needs:
Perpetual Source of
Opportunity

Medtronic Strategies to
Capture Growth

Three Diversified
Growth Vectors

New Therapies

Improve Clinical Outcomes

200-350bps
Therapy Innovation

FY16 SIZE: ~$25B


FY17-21E: 2-4% CAGR

Emerging Markets

Expand Access

150-200bps
Globalization

Optimize Cost & Efficiency

FY16 SIZE: ~$4B


FY17-21E: 10-13% CAGR

Services & Solutions


40-60bps
FY16 SIZE: ~$300M
FY17-21E: 27-36% CAGR

Economic Value

18

Morgan Stanley Global Healthcare Conference | September 13, 2016

PORTFOLIO MANAGEMENT
STRONG CROSS GROUP SYNERGIES
Surgical Innovations

CRHF
SCA
Arrhythmia
Heart Failure
AF

Coronary and
Structural Heart
Focused
Companies

Hypertension

CAD

Heart Disease

Aortic & Peripheral


Vascular
Aortic & Venous Disease
CAD

Groups

CVG

PAD

Thoracic GYN Bariatric


Colorectal General Surgery

Brain
Stroke
Movement Disorders

Early Technologies

Spine

Lung / Gastrointestinal Cancer

Spinal Deformity

Patient Monitoring
& Recovery
Respiratory
Nutritional
Insufficiency

Degenerative Spinal
Conditions

Infection
Deep Vein
Thrombosis

Pain
Chronic and Cancer Pain

Renal Care

Specialty Therapies

MITG

RTG
Comorbidity
Integrated Technology

Corporate
Synergies

Clinical / Regulatory Expertise


Sales to Large Entities (Governments / Providers)
Global Manufacturing / Operations / Distribution
Corporate Infrastructure

19

Morgan Stanley Global Healthcare Conference | September 13, 2016

Intensive Insulin
Management
Type 1

Non-Intensive
Diabetes Therapies
Pre-Diabetes
Type 2

Diabetes Service &


Solutions
Integrated Care
Solutions

Diabetes

BROAD PRINCIPLES OF THERAPY INNOVATION


HOW MEDTRONIC IS EXECUTING
BREADTH

FOCUSED

Choosing the Right Product


Clinical and economic value in PDP process

Cross-Selling
TYRX through NeuroStim & Spine
Reveal LINQ through Neurovascular
Peak Plasmablade through CHRF

Product Cadence
New therapies key to sustainable midsingle digit growth

2
3

GM Structure
Ensure breadth of offerings across BUs
Partner with physicians to champion next

Technology-Sharing
RF Generator Design (MITG & CVG)
Vascular Embolics (RTG & CVG)
Patient Management Database Architecture
(Diabetes & CVG)

major innovation

Marketplace Leadership
20

Morgan Stanley Global Healthcare Conference | September 13, 2016

FOCUSED: NEW THERAPIES ARE KEY TO SUSTAINABLE MSD GROWTH


Beyond MiniMed 670G

Extravascular ICD

FY20 &
Beyond

IntrepidTM TMVR
LINQ IITM
Polaris (US / EU)
Drug Filled Stents (EU)

FY19

Renal Solutions

DBS PC/RC with Sensing


Robotics Platform

CoreValve EvolutTM R XL(EU & US)


AzureTM (EU)

3T MRITM Pacing (US)


Evera MRITM ICD (US)

FY17
FY16

>80 product launches


over the next 3 years
generating ~$4B in
cumulative revenue from
new products by FY21

SigniaTM Powered
Stapler

4th Generation
Pipeline

iPro 4

Harmony 1

IN.PACT Admiral (US)


ValleylabTM FT10

iPro 3

Stealth-Midasv
Stealth-Connect

Solitaire
Platinum
Atlantis EssentialsTM
Anterior Cervical Plate

Visia AF MRITM (US)

NextGen
O-Arm

MiniMed 670G (US)


Guardian Connect with
EnliteTM 3 (US)
MiniMed 630G (US)
with Enlite CGM
sensor

MiniMed 640G (EU)

MicraTM (EU / US)

Cardiac & Vascular


Group

21

iPro 5

Cranial Robot

CoreValve EvolutTM PRO

FY18

Harmony 2

DBS Lead Refresh


IntellisTM RC

Valiant Evo

Resolute ONYXTM
(US)

Medina Embolization (US)

Minimally Invasive
Therapies Group

Restorative
Therapies Group

Morgan Stanley Global Healthcare Conference | September 13, 2016

Diabetes
Group

BREADTH: CROSS-GROUP / BU TECHNOLOGY & SALES SYNERGY

TECHNOLOGY
SHARING ACROSS
BUSINESS UNITS

TECHNOLOGY
SHARING ACROSS
GROUPS

GROUP
CROSS-SELLING
OPPORTUNITIES

LEVERAGING GLOBAL
OPERATIONS CENTERS
OF EXCELLENCE

Drug Device Combinations


(e.g. CSH & APV)

RF Generator Design
(e.g. MITG & CVG)

TYRXTM through NeuroStim


& Spine

ECT Cannula
from MITG Mexico

Therapy Delivery Catheters


(e.g. CRHF & CSH)

LAA Stapler, Endoscopic


Vein Harvesting (e.g. CVG &
MITG)

Navigation & Imaging


(e.g. Spine & Brain)

Vascular Embolics
(e.g. RTG & CVG)
Patient Management
Database Architecture
(e.g. Diabetes & CVG)

22

Chip-based Glucose
Sensors from MTC Tempe
Reveal LINQTM
through Neurovascular

Peak Plasmablade
through CRHF

Morgan Stanley Global Healthcare Conference | September 13, 2016

Transcatheter
Valve/Endovascular
Delivery Systems from
Galway

UNLOCKING THE EMERGING MARKET OPPORTUNITY


EMERGING MARKETS PREMIUM:
ATTRACTIVE OPPORTUNITY

DIVERSIFIED EMERGING
MARKET GROWTH
Other Asia
~5%

India
~5%

Existing

technology

Central &
Eastern EU

Out-of-pocket

~10%

Greater
China

Latin
America

~40%

~20%

payment or
reimbursement
established

$5B

Annual
Opportunity

Comparable
margins to
developed
markets

Middle East &


~20%
Africa

STRATEGIC GROWTH DRIVERS


Traditional Market
Development
Education & Training
Distribution Reach

Channel
Optimization

Private
Partnerships

The penetration of existing therapies into emerging markets


represents the single largest opportunity in MedTech.
23

Morgan Stanley Global Healthcare Conference | September 13, 2016

Public
Partnerships

GOING BEYOND TRADITIONAL MARKET DEVELOPMENT


CHANNEL OPTIMIZATION
BENEFITS

APPROACHES

Allows Medtronic to better serve customer

PARTNERSHIP MODEL CHANGE

needs through more direct relationships

Accelerates growth and captures margin:


shared benefit for both the end customer
and Medtronic

Strengthens systematic integrity and


compliance

OPPORTUNITY

Today, nearly $3B of MDT sales through


over 7,000 distributors

Optimizing distributor relationships will


result in an estimated $1.75B over the next
5 years

24

CHINA & INDIA

Consolidate and shift Roles and

Responsibilities
Adjust distributor margins
correspondingly
Distributors focus more on logistics
and last-mile services

DISTRIBUTOR TRANSITIONS
TURKEY
Q4 FY14: Formed Biostar JV with
largest distributor; expanding to
additional business units
SAUDI ARABIA
Q1 FY16: Formed JV with largest
distributor (Gulf Medical) for select
business units

Morgan Stanley Global Healthcare Conference | September 13, 2016

GOING BEYOND TRADITIONAL MARKET DEVELOPMENT


PUBLIC / PRIVATE PARTNERSHIPS
PUBLIC PARTNERSHIPS
RUSSIA SOLE SOURCE SUPPLIER
Cardiovascular disease is the leading

cause of death in Russia


Russian government committed to increasing
Acute Coronary Syndrome (ACS) spend by ~4x

ABRAAJ STRATEGIC PARTNERSHIP


Abraaj purchases or builds hub
hospitals surrounded by networks
of clinics

Referral chain and product supply expertise

Sole supplier arrangement for coronary stents

Focused on Asia, Middle East & Africa, and

Estimated 800K-1M ACS patients 2017-2020

Committed to improving patient access,

and balloons in Russia for 2017-2022

MDT majority partner in JV with private company


CHINA CHENGDU DIABETES & DIALYSIS

Long-term government partnership

other developing markets

healthcare delivery outcomes, and product


supply

INDIA CLMS PARTNERSHIP


19 partnerships in place; 17 in India, 2 pilot
programs in Southeast Asia

MDT to locally manufacture dialysis

Targeted scope to enable infrastructure creation

Commercial commitment

Focus on building access in Tier 2-3 cities with

system and next generation sensor


augmented pumps

and joint market access


development

25

PRIVATE PARTNERSHIPS

and market development with incremental device


revenue opportunity
entrepreneur led and mid-market hospitals (KIMS)

Building pipeline in Southeast Asia and Australia


Morgan Stanley Global Healthcare Conference | September 13, 2016

ECONOMIC VALUE
THREE CATEGORIES OF OFFERINGS

Historical Business

Medical
Devices

Value-Based
Healthcare Offerings

New Business

Core business
Proprietary
technology
Examples:
ICD, Stent, Spinal
Fixation System, Insulin
Pump
Primary Customers:
Physicians, Patients

2
3
Business Model Innovation

26

Morgan Stanley Global Healthcare Conference | September 13, 2016

BUILDING OPPORTUNITY FOR VALUE-BASED HEALTHCARE


Current
Environment

Medtronic Differentiators in Value-Based Healthcare

GDP
Pressures

Expertise in Care
Pathway
Development
Current
Efforts Not
Enough

Stakeholders
Engaged in
Change

Opportunity
to Lead

27

Disease &
Condition
Understanding

Technology Innovation in
Care Delivery: IT, PostAcute Care, Mobile

Healthcare
Economics &
Payment Model

Visibility & Influence


with Policy Makers and
Large Shareholders

Morgan Stanley Global Healthcare Conference | September 13, 2016

Capital Infusion and


Ability for Shared
Risk / Reward

VALUE-BASED HEALTHCARE OFFERINGS


1

CHRONIC CARE
MANAGEMENT
Diabeter

EPISODIC
BUNDLE
Orthopedic Solutions

Integrated diabetes management

Goal to reduce system costs across

MDT owned stand-along clinics

Comprehensive solution

offering remote care through


connectivity

Focused on achieving optimal glucose


control for patients at the lowest
decile of cost to payers

3 THERAPY OPTIMIZERS

the entire episode while maintaining


or improving outcomes
underpinned by complication
management and post-acute
monitoring

TYRXTM

Anti-infection envelope for


implantable devices

Reduces infections by 70-100% in


high-risk patients

Shared savings model to improve

outcomes and reduce costs to both


the providers and payors

5 Netherlands-based clinics with a

pipeline of UK, MEA and US prospects

NOK

Global standard of care for bariatric


surgery featuring standardized
nutritional and medical support

Increased patient engagement and


more durable weight loss

8 Netherlands-based clinics with


roadmap to future expansion

28

CABG

Positioned to offer technologies and


services across the CABG care
continuum

Pre- and peri-procedure


Post-Discharge
Willing to share financial

accountability for the performance


of our products and services

Respiratory Compromise

~15M people affected with an

average of $18K added hospital cost


per patient in the US

5-year pledge to reduce unplanned

ICU admits and other codes by 20%

50% rebate on consumables

purchased in one year if objectives


arent met

Morgan Stanley Global Healthcare Conference | September 13, 2016

CLMS / ORMS: DRIVING STRONG REVENUE GROWTH AT ACCOUNTS


IMPROVED QUALITY OF REVENUE AND SUSTAINABILITY
Long-Term Managed Service Agreements

Overview
100

Cath Lab Managed Service

increased device share, while


maintaining OM % of sales

Increasingly global scale and


broadening our product offering
to drive future growth

Proven CLMS results:


25-35% increase in lab

88

Total Managed Service Agreements

Create incremental revenue and

97

77

75
66
NGC
Acquired

savings

Nearly 100 accounts


representing $2.1B sales over
average 6-year life of contracts

52

1.5

62

50
38

48

1.0

25
0.5
15

capacity

Increased market share and

0.0
Q1

Q2

Q3

Q4

Q1

Q2

FY2015
Total Managed
Service Agreements

Long-term managed service agreements including CLMS and ORMS (beginning in Q1 FY16).
Contracted service and product revenue over an average span of 6 years.
29

2.0

Morgan Stanley Global Healthcare Conference | September 13, 2016

Q3

FY2016

Q4

Q1
FY2017

Contracted Service
and Product Revenue

Contracted Service & Product Revenue ($B)

(CLMS) and Operating Room


Managed Service (ORMS)
agreements represent longterm partnerships with providers

2.5

EPS WALK / FY17 GUIDANCE


FY16-FY17
~750-1,000 bps
EPS Leverage

~12-16% CC
EPS growth
~$0.20

$0.25

$4.37

FY16
EPS

$4.70

$4.60

~($0.08)

($0.10)

Extra Week
Impact CC

Rev. Growth

OP.
Lev.

FIN
Lev.

FY17E EPS CC

FX

FY17E
EPS

EPS growth of 12%-16% CC, excluding the impact of the extra week
Despite significant FX pressure, EPS growing 7%-10% on reported basis (excluding the impact of the
extra week)

30

Morgan Stanley Global Healthcare Conference | September 13, 2016

ROADMAP TO DOUBLE DIGIT EPS GROWTH


FY17-FY21
EPS CAGR 10%-12%
~400-650 bps
EPS Lev.
~400-650 bps
EPS Lev.
Operating
Leverage

~400-650 bps
EPS Lev.

Financial
Leverage

~400-650 bps
EPS Lev.

$4.70

$4.60

FY17E
EPS

Rev.
Growth

Lev.

FY18E
EPS

Rev.
Growth

Lev.

FY19E
EPS

Rev.
Growth

Lev.

FY20E
EPS

Rev.
Growth

Lev.

FY21E
EPS

Balanced drivers of EPS growth: revenue, operating leverage, and financial leverage
Multiple levers to achieve low double-digit EPS growth commitment
EPS leverage on a constant currency basis
31

Morgan Stanley Global Healthcare Conference | September 13, 2016

MEDTRONIC GROWTH MODEL


EXPECT TO GENERATE STRONG TOTAL SHAREHOLDER RETURN
Therapy Innovation
Emerging Markets
Services & Solutions

Revenue Growth
Mid-Single Digits

Covidien Synergies
COGS Reduction
G&A Leverage

Interest Income

Operating Leverage
Low to Mid-Single
Digits
Financial Leverage
Low-Single Digits

EPS Growth
Double Digits

Low-Double Digits
to Mid-Teens

Dividend Yield
Low-Single Digits

Tax
Share Repurchases

All growth rates and leverage targets given on a constant-currency basis.


32

Total Shareholder
Return

Morgan Stanley Global Healthcare Conference | September 13, 2016

NON-GAAP RECONCILIATION TABLES

Morgan Stanley Global Healthcare Conference | September 13, 2016

NON-GAAP RECONCILIATION TABLE

Morgan Stanley Global Healthcare Conference | September 13, 2016

NON-GAAP RECONCILIATION TABLE

Morgan Stanley Global Healthcare Conference | September 13, 2016

NON-GAAP RECONCILIATION TABLE

Morgan Stanley Global Healthcare Conference | September 13, 2016

NON-GAAP RECONCILIATION TABLE

Morgan Stanley Global Healthcare Conference | September 13, 2016

NON-GAAP RECONCILIATION TABLE

Morgan Stanley Global Healthcare Conference | September 13, 2016

NON-GAAP RECONCILIATION TABLE

Morgan Stanley Global Healthcare Conference | September 13, 2016