TH

34 ANNUAL

J.P. MORGAN
HEALTHCARE
CONFERENCE
JANUARY 11, 2016
SAN FRANCISCO

OMAR ISHRAK
CHAIRMAN & CEO

FORWARD LOOKING STATEMENT

Some of the statements contained in this program may be considered forward-looking statements which
provide current expectations or forecasts of future results. These forward-looking statements generally
relate to market and sales growth, growth strategies, financial results, use of free cash flow, product
development and introduction, regulatory matters, restructuring initiatives, intellectual property rights,
litigation and tax matters, mergers and acquisitions, divestitures, accounting estimates, financing activities,
working capital adequacy, ongoing contractual obligations, competitive strengths, and sales efforts. They are
based on current assumptions and/or expectations that involve a number of uncertainties or risks. These
uncertainties and risks include, but are not limited to, those outlined in Medtronics Annual Report on Form
10-K for the year ended April 24, 2015, and other documents previously or subsequently filed with the U.S.
Securities and Exchange Commission (SEC). Investors are advised to review any further disclosures which
may be made in such reports filed periodically with the SEC. Forward-looking statements are made as of
today's date, and the Company undertakes no duty to update them. In addition, non-GAAP to GAAP
reconciliations are attached.

Historical Financial Data Definitions

This presentation refers to historical financial data that sums historical data of both Medtronic and Covidien.
This data is different than the pro forma information previously included within certain SEC filings.
Management believes that using these measures are a useful way to evaluate Medtronics underlying
performance. All reconciliations of these measures to the most directly comparable GAAP financial measures
are attached.
Comparable Basis: Includes Covidien plc in the prior year comparison and aligns Covidiens prior year
monthly revenue to Medtronics fiscal quarters.
Combined Basis: Combines Covidiens closest reported quarter with Medtronics fiscal quarter in the prior
year comparison.
2

34th Annual J.P. Morgan Healthcare Conference | January 11, 2016

MEDTRONIC: UNIQUELY POSITIONED TO WIN IN

GLOBAL HEALTHCARE
Revenue Growth: Strong execution leading to
consistent mid-single digit growth resulting in above
market performance
Operating Leverage: COV integration resulting in
tangible and sustainable operating margin leverage
at the high end of our baseline expectation of 200400bps of EPS leverage
Capital Deployment: Disciplined capital deployment
with a roadmap to increased accessible cash and
dividend growth
Sustained Double-Digit
Total Shareholder Returns Over the Long Term
Note: All references to revenue growth and EPS leverage are on a constant currency basis.
3

34th Annual J.P. Morgan Healthcare Conference | January 11, 2016

GUIDANCE UPDATE
REITERATING 2H FY16 REVENUE OUTLOOK; UPDATING FY16 EPS
REVENUE OUTLOOK

Reiterating 2H FY16 revenue growth in the upper-half of our mid-single digit

baseline range on a comparable, constant currency basis
FY16 EPS GUIDANCE

$4.36 to $4.40, up from $4.33 to $4.40

Reflects benefit of the permanent enactment of the U.S. R&D tax credit
Continues to include an expected $0.45 to $0.50 negative FX headwind
Implied 2H FY16 EPS leverage of over 1,000bps 1
CAPITAL DEPLOYMENT

Net result of the capital allocations announced today are not expected to
materially affect 2H FY16 net interest expense, net earnings, diluted
weighted shares outstanding or diluted earnings per share
1
4

Constant currency.
34th Annual J.P. Morgan Healthcare Conference | January 11, 2016

CONSISTENT STRATEGIES DRIVING GROWTH VECTORS

UNIVERSAL
HEALTHCARE
NEEDS

Improve Clinical
Outcomes

SOURCES
OF GROWTH

MEDTRONIC
STRATEGIES

Growth Vector #1
New
Therapies
Therapy
Innovation

+150 to 350bps

Operational
Execution

Expand Access
Globalization

Growth Vector #2
Emerging
Markets

Reliable,
consistent midsingle digit growth

EPS leverage of
200-400bps

+150 to 200bps

Optimize Cost and

Efficiency

Growth Vector #3
Services and
Solutions

Economic
Value

+40 to 60bps

Note: All references to revenue growth and EPS leverage are on a constant currency basis.
5

FINANCIAL
MODEL

34th Annual J.P. Morgan Healthcare Conference | January 11, 2016

Return a minimum
of 50% FCF to
shareholders

CREATING LONG-TERM SHAREHOLDER VALUE

IMPROVING REVENUE, EPS AND FREE CASH FLOW GROWTH
REVENUE GROWTH1 (Y/Y)
+1.0%

Commitment: mid-single digit growth.

+2.0%

+4.5%

+4.0%

+6.0%

+6.0%

8.0%
6.0%

4.0%

Mid-Single
Digit
Range

2.0%
0.0%

-3.5%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
FY11

FY12

FY13

NON-GAAP EPS2
$4.50
$4.00
$3.50
$3.00
Billions

400 bps of cc
leverage

100bps

FY11

FY12

= Returned to shareholders.

FY11

1
2
3

FY15

FY16

Commitment: EPS leverage of 200-400 basis points, constant currency.

400bps
FY13

ADJUSTED FREE CASH FLOW3

7,500
5,000
2,500
0

FY14

FY12

400bps

FY14

200bps

700-950bps

FY15

FY16E

Commitment: Return a minimum of 50% to shareholders.

FY13

FY14

FY15

Constant currency. Q1 FY11 and Q1 FY16 adjusted for extra week impact. Q4FY15 through Q2 FY16 on a comparable basis.
Non-GAAP EPS on a constant currency basis. Leverage rounded to the nearest 50bps.
34th Annual J.P. Morgan Healthcare Conference | January 11, 2016
FCF is operating cash flow minus capital expenditures.
Adjusted for litigation settlements.

FY16E

CY2015 IN REVIEW: THE NEW MEDTRONIC

ACQUISITION RATIONALE
Delivering on Commitments
Made at Deal Announcement

PRESERVE

Preserving and accelerating core

strategies: Therapy Innovation,
Globalization & Economic Value

Employee
satisfaction
and talent
retention

Offering a more comprehensive

and competitive growth platform

Revenue and
EPS growth
across groups

Diversifying revenue mix

Capturing operational synergies

Accretive to FY16 cash EPS and

significantly accretive thereafter

Increasing access to capital and

optimizing shareholder returns
through deployment flexibility

INTEGRATION PRIORITIES
2
OPTIMIZE

>$850M cost synergies by FY18

Indirect sourcing
ERP consolidation
Real estate / manufacturing

4
3

ACCELERATE

Synergy opportunities for

COVs Peripheral Vascular
and Neurovascular divisions
Capital deployment and
access to trapped cash
Share repo / dividends
Debt paydown

34th Annual J.P. Morgan Healthcare Conference | January 11, 2016

TRANSFORM
Delivering higher value
in healthcare
Aligning solutions to
emerging value-based
payment models
Partnering with new
stakeholders to
transform the
healthcare marketplace

INTEGRATION UPDATE: PRESERVE AND OPTIMIZE

TALENT, FINANCIAL METRICS, AND PRODUCTIVITY GAINS
1

PRESERVE

GROWTH
PRESERVATION

TALENT RETENTION
Medtronic and Covidien
cultures continue to
come together

Talent retention and

employee satisfaction
remains strong

Monthly survey

encourages open
communication

8%

SUSTAINABILITY
Diabetes
10%

Y/Y Revenue Growth (CC)

RTG
38%

6%
4%
2%
0%
FY14

MDT INC.

1H FY15

COV

1H FY16

RTG
25%

FY14:
$17.0B

FY15:
3
$28.2B
CVG
52%

MDT PLC

Diabetes
6%

Diversification of MDT Revenue Base

CVG
35%

MITG
34%

OPTIMIZE

VALUE CAPTURE PROGRAMS TO RESULT IN A MINIMUM OF $850M IN SAVINGS BY FY18

Service Model Efficiency / Real Estate

Centralizing targeted back-office
processes in shared service centers
Maximizing real estate productivity

Global ERP Implementation

Superior Sourcing
Renegotiating sourcing contracts for
freight, logistics and distribution
Direct sourcing and self-insurance

Manufacturing Consolidation

1
2
3

Driving organizational efficiency

through a common ERP platform

Optimizing manufacturing footprint in

FY18+ (not included in >$850M guidance)

COV 1H FY15 represents Y/Y constant currency growth for calendar 1Q15 and 4Q14.
Comparable, constant currency. Q1 FY16 adjusted for extra week impact.
FY15 revenue on a comparable basis.
34th Annual J.P. Morgan Healthcare Conference | January 11, 2016

INTEGRATION UPDATE: ACCELERATE AND TRANSFORM

COMPLIMENTARY PORTFOLIOS, VALUE-BASED HC LEADERSHIP
3

ACCELERATE

NEUROVASCULAR
Critical element
40%
of rapidly
developing MDT
Neuroscience
strategy within
RTG

Leveraging the

neurologist callpoint

30%

Y/Y Medtronic
Neurovascular Growth
+32%
+23%

+25%

above market growth

20%

Enabling broader partnerships

10%
0%

Q4 FY15 Q1 FY16 Q2 FY16

TRANSFORM

USING CATH LAB MANAGED SERVICES AS

A ROADMAP FOR OR MANAGED SERVICES

ESTABLISHING MEDTRONIC AS THE

VALUE-BASED HEALTHCARE LEADER

Operating Room Managed Services (ORMS)

Complimentary solutions across the care

applies MDTs cath lab business model to an

operating room setting

Utilizes the breadth of MITG products

continuum creating integrated offerings

Deep clinical and healthcare economics expertise

Covidien delivering in-hospital efficiencies

6 ORMS deals representing ~$140M

Market-leading distribution footprint

in cumulative revenue as of Q2 FY16

Leading U.S. DCB (IN.PACT Admiral)

Combined salesforce fully integrated and driving

PERIPHERAL VASCULAR

Q1 FY16 adjusted for extra week impact and Y/Y growth in comparable constant currency.
34th Annual J.P. Morgan Healthcare Conference | January 11, 2016

CAPITAL ALLOCATION: IMPROVED CASH ACCESSIBILITY

PRE-COVIDIEN1

FY16E FY18E
Accessible
FCF

Trapped
FCF

~$5.5B
Trapped
FCF

Dividends

Financial
Flexibility

Trapped
Cash to B/S

~$6B
Trapped
B/S Cash

Share
Repurchase
M&A

Debt
Issuance
Only ~35% of Free Cash Flow Accessible
Issued Debt to Cover Additional Accessible
Cash Needs
Trapped Cash Accumulated
Returned ~50% of Free Cash Flow to
Shareholders

10

~$11B
Accessible
FCF
Dividends
Share
Repurchase
Debt
Paydown

~$9.3B
Untrapped
B/S Cash

Incremental
Share
Repurchase

$4B
Accessible
B/S Cash

~65% of Free Cash Flow Accessible

Untrapping Cash; Already $9.3B in FY16
Return Minimum of ~50% of Free Cash Flow to
Shareholders; Target 40% Dividend Payout Ratio
Target A Credit Profile
Maintaining Healthy Financial Flexibility

Free cash flow (FCF) defined as Operating Cash Flow less Capital Expenditures
Outer rings are sources of cash. Inner rings are uses of cash.
34th Annual J.P. Morgan Healthcare Conference | January 11, 2016
1. FY12-FY15, not including impact of Covidien acquisition.

DETAILS OF $9.3B CAPITAL DEPLOYMENT

INCREASED FLEXIBILITY IN CAPITAL ALLOCATION
1

SHARE REPURCHASES

Incremental $5 billion by the end of FY18

In addition to MDTs current commitment to
return a minimum of 50% of FCF each year
Opportunistically utilize existing Board
authorization
Bias towards repurchasing shares earlier

18.0

~$15B
15.0

9.0

~$6.2B

3.0

Continue to target A-credit rating profile

0.0

MAINTAIN FINANCIAL FLEXIBILITY

Potential to accelerate payout ratio faster

than previously communicated

~$7.0B

6.0

Targeted commitments to debt investors by

the end of FY18

Incremental
$5B Share
Repurchase

12.0

ADDITIONAL DELEVERAGING

Repay existing debt or debt coming due

STRONG RECORD OF RETURNING

CASH TO SHAREHOLDERS

$ Billions

FY10-FY12 1
Dividends

FY13-FY15

FY16-FY18E

Net Share Repurchases

Commitment: Return A Minimum of 50% of

Free Cash Flow to Shareholders

1
FY12 includes $213M of proceeds related to the sale of Physio-Control used for share repurchases.
Note: Free cash flow (FCF) defined as Operating Cash Flow less Capital Expenditures
34th Annual J.P. Morgan Healthcare Conference | January 11, 2016
11

STRONG, CONSISTENT TRACK RECORD OF DIVIDEND GROWTH

TARGETING 40% PAYOUT RATIO
45%

$2.75
$2.50

$2.25

35%

$1.75

Dividend per Share CAGR

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

$1.50
$1.25
$1.00

30%
25%

$0.75
$0.50

Payout Ratio1

$0.25

Dividend per Share

20%

$0.00

Member of S&P 500 Dividend Aristocrats

38 Years of Increasing Dividend per Share

1
12

On a non-GAAP basis. Calculated as annual dividend per share divided by prior year non-GAAP earnings per share.
34th Annual J.P. Morgan Healthcare Conference | January 11, 2016

FY20E

FY18E

FY16E

FY14

FY12

FY10

FY08

FY06

FY04

FY02

FY00

FY98

FY96

FY94

FY92

FY90

FY88

FY86

FY84

FY82

FY80

FY78

15%

Payout Ratio

Dividend per Share

$2.00

40%

Dividend Payout Ratio now ~35%1

Dividend up +25% in FY16E

CLEAR FRAMEWORK FOR EXISTING PORTFOLIO

STRONG CROSS-GROUP SYNERGIES DRIVE STRATEGIC FIT
CVG
CRHF
SCA Arrhythmia
AF
Heart Failure
Coronary and
Structural Heart
CAD
Hypertension
Heart Disease
Aortic & Peripheral Vascular
Aortic & Venous Disease
CAD
PAD

RTG

Diabetes

Brain
ENT Stroke
Movement Disorders

Intensive Insulin
Management
Type 1
Diabetes

MITG
Surgical Innovations
Thoracic GYN Bariatric
Colorectal General Surgery
Early Technologies
Lung / Gastrointestinal Cancer
Patient Monitoring
& Recovery
Respiratory Infection
Nutritional
Deep Vein
Insufficiency Thrombosis
Renal Care

Non-Intensive
Diabetes Therapies
Pre-Diabetes
Type 2
Diabetes
Diabetes Service
& Solutions
Integrated Care
Solutions

Spine
Spinal Deformity
Degenerative Spinal
Conditions
Pain
Chronic Pain
Trauma

Comorbidity
Strong
CrossGroup
Synergies

Integrated Technology
Clinical / Regulatory Expertise
Sales to Large Entities (Governments / Providers)
Global Manufacturing / Operations / Distribution
Corporate Infrastructure

Portfolio
Criteria
13

Line of Sight to Improving

Outcomes?

What Value Does

Medtronic Add?

34th Annual J.P. Morgan Healthcare Conference | January 11, 2016

Is Medtronic Positioned
to Win?

LEVERAGING STRENGTHS ACROSS GROUPS AND CONTINUUM

DEVELOPING COMPREHENSIVE SOLUTIONS
STROKE THERAPY

RENAL CARE SOLUTIONS (RCS)

~17M strokes annually worldwide

~3M end stage renal disease (ESRD) patients WW,

+2x over the next 10 years

$70B annual cost to healthcare systems

MDT positioned as the only full-line supplier of
device-based stroke therapy

Comprehensive platform anchored by key

market leading product lines and therapies

Stabilizing
Therapy

Stroke
Patient

SolitaireTM
Medina

Identifying
Root Cause
Reveal
LINQ

14

care using proprietary therapy. 90% less water

than traditional single-pass HD

Chengdu government manufacturing and

deployment agreement

Treating
Root
Cause
AF

Therapy

ESRD
Patient

Vascular
Access

Structural
Heart
Therapies
Care
Management
Services

Optimized
Management

Reveal
LINQ
SEEQ Patch

SEEQ Patch

Lazarus

PipelineTM Flex

MDT advanced dialysis offers low cost, high quality

Carotid
Stents

DCB
Advanced
Dialysis

34th Annual J.P. Morgan Healthcare Conference | January 11, 2016

Care
Management
Services

Future
Co-morbidity
Applications

Diabetes
CGM/
Pump
Heart
Failure
Devices
TYRX
DES

DISCIPLINED PORTFOLIO MANAGEMENT GOVERNS M&A AND

STRATEGIC INVESTMENT
1

Meets Portfolio
Criteria

Strengthens Strategic Priorities Across Groups

CVG

MITG

RTG

Diabetes

Therapy
Innovation

Partnership

Investment

Partnership

Globalization
Partnership

Economic
Value

Partnership

Minimal to no
net EPS dilution

Meets Financial Guidelines

Clear financial value proposition

Mid-teens riskadjusted return hurdle

Medtronic has Announced $1.5B of Strategic M&A Since Closing Covidien

15

34th Annual J.P. Morgan Healthcare Conference | January 11, 2016

THERAPY INNOVATION
$ CONTRIBUTION
$ Billions

35.0
30.0
25.0
20.0
15.0
10.0
5.0

Note: All growth rates and revenue amounts are as reported and include both Covidien and Medtronic.

FY20E

1H
FY16

FY15

FY14

FY13

FY12

FY11

0.0

CONTINUOUS INNOVATION WILL FUEL OUR LONGTERM SUCCESS

Intrepid
TMVR
Intellis RC

Resolute
Onyx (US)

Brady Wireless (CE)

CoreValve
(Japan)

Micra TPS
(CE)

Evera MRI
ICD

CoreValve
Evolut R
MRI Safe
CRT-D
GastriSail

Barrx 360
Express

In-Stent
Restenosis

Capnostream CardioInsight DCB BTK

35
ecVUE
Arctic
Front
Advance
(Japan)

Visia AF
MRI

FY16

Cervical
Fixation
System
Endurant Evo
(CE)
Micra TPS
(US / Japan)

Signia
Powered
Stapler

MiniMed
670G (US)

CoreValve
Evolut R
(Japan)

TAVR

Guardian
Intermediate
Connect with
Risk
Enlite 3 (US)
CRT-P Quad
(EU)

Medina Embolization

iPro3 (EU)

Evolut R
XL
LINQ
(Japan)

Note: Timeline is illustrative of general launch timing.

17

34th Annual J.P. Morgan Healthcare Conference | January 11, 2016

RDN

Pipeline Flex
(US)
Sapiens

Valiant Evo
(EU & US)

Drug Filled
Stent (EU)

Resolute
Onyx (Japan)

FY18

FY17

Pedicle
Screw
System

Robotics
Platform

Beyond

GLOBALIZATION
$ CONTRIBUTION

TOTAL EMERGING MARKET SALES

1
BY GEOGRAPHY (Q2 FY16)

$ Billions

8.0

Central & India

Eastern EU ~5%

6.0

~10%

ASEAN
~5%

4.0

Greater
China
~40%

Latin
America
~20%

2.0

Middle East &

Africa
FY20E

1H
FY16

FY15

FY14

FY13

FY12

FY11

0.0

Note: All growth rates and revenue amounts are as reported and include both Covidien and Medtronic.
1
Percentages calculated based on reported sales by geography.

~20%

UNLOCKING THE EMERGING MARKET OPPORTUNITY

EMERGING MARKETS PREMIUM:
ATTRACTIVE OPPORTUNITY

COVIDIEN ENHANCES REVENUE

GROWTH

$5B

Broader presence, facilities,

Existing

technology

Out-of-pocket

payment or
reimbursement
established

more rapid expansion

Annual
Opportunity

Capital equipment provides base

for therapies

Comparable
margins to
developed
markets

Combined breadth enables

broader partnerships

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.
19

34th Annual J.P. Morgan Healthcare Conference | January 11, 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

20

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

34th Annual J.P. Morgan Healthcare Conference | January 11, 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

PRIVATE PARTNERSHIPS

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

21

and market development with incremental device

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

Building pipeline in Southeast Asia and Australia

34th Annual J.P. Morgan Healthcare Conference | January 11, 2016

SERVICES & SOLUTIONS

$ CONTRIBUTION
$ Millions

750

Includes Care

Management
Services
(Cardiocom), Cath
Lab Managed
Services, Operating
Room Managed
Services and
Diabeter

500

250

Figures do not

reflect related
device revenue

Note: All growth rates and revenue amounts are as reported and include both Covidien and Medtronic.

FY20E

1H
FY16

FY15

FY14

FY13

FY12

FY11

SERVICES & SOLUTIONS: DIVERSIFYING BEYOND

DEVICES TO DELIVER ECONOMIC VALUE
Historical Business

Medical
Devices

New Offerings

Services & Solutions

Wrap-Around
Programs

Independent Health
Solutions

Core business
Proprietary
technology

Linked directly to a specific

device or devices
Helps to realize the full
value of the device

Not dependent on devices

Broader disease management
programs

Examples:
ICD, Stent, Spinal
Fixation System, Insulin
Pump

Examples:
CVG Solutions, Surgical
Synergy, Diabetes Services &
Solutions

Primary Customers:
Physicians, Patients

Primary Customers:
Hospital Department
Administrators, Physicians

Examples:
Care Management Services,
Cath Lab Managed Services,
Operating Room Managed
Services, Diabeter
Primary Customers:
Hospital Administrators,
Payers, Governments

Business Model Innovation

Medtronic
Integrated Health Solutions
23

34th Annual J.P. Morgan Healthcare Conference | January 11, 2016

REIMBURSEMENT MODELS SHIFTING TO VALUE

MEDTRONIC
VALUE-BASED
HEALTHCARE
FOCUS

MEDTRONIC LEGACY
BUSINESS MODEL

ACTIVITY BASED
PROCESS MEASURES

HIGHEST COST
PATIENTS
INTEGRATED CARE/
BUNDLED PAYMENT

BROADEN PATIENT
POPULATION,
INCORPORATING
BUNDLED PAYMENTS TO
ADDRESS HIGH COST,
HIGH ACUITY PATIENTS
CAPITATION/
GLOBAL PAYMENT
ACCOUNTABLE
CARE/
SHARED SAVINGS

PAY FOR
PERFORMANCE
FEE FOR SERVICE
(e.g. DRGs)

Reimbursed for volume

of services, not value

24

Fee for service at risk for

bonuses/penalties based
on performance
measures

Single payment for all

services provided for an
episode of care

Capitated payment for

some, but not all,
services

34th Annual J.P. Morgan Healthcare Conference | January 11, 2016

Capitated payment for

all services provided

STEPS TO VALUE-BASED HEALTHCARE

1

3
DEVELOP BUSINESS
MODEL

IDENTIFY
DEFINE AND BASELINE
PATIENT COHORT
OUTCOMES
STEPS TO VALUE-BASED HEALTHCARE
SELECT A
DISEASE OR
CONDITION

DEVELOP
PATIENT
COHORTS
BASED ON
RISK AND
PROTOCOLS

DEFINE
OUTCOME
MEASURES
THAT ARE
MEANINGFUL
FOR
PATIENTS

DEFINE
TIMEFRAME
REQUIRED TO
ACHIEVE
OPTIMAL
OUTCOME

QUANTIFY
BASELINE
OUTCOMES
AND COSTS
FOR EACH
PATIENT
COHORT

DETERMINE

PROSPECTIVE
PERFORMANCE
AND COST
OBJECTIVES
THE VALUE
PROPOSITION

Critical to Medtech Innovation

New Partnerships and Business Models
Based on Joint Accountability

Medtronic Shaping the Future of Healthcare

25

34th Annual J.P. Morgan Healthcare Conference | January 11, 2016

DEVELOP
BUSINESS
MODEL

FOCUSED ON DELIVERING STRONG, CONSISTENT LONGTERM TOTAL SHAREHOLDER RETURN

MEDTRONIC FINANCIAL FORMULA
Revenue Growth: Strong
execution leading to above market
performance

Consistent mid1
single digit growth

Operating Leverage: COV

integration resulting in tangible
and sustainable operating margin
leverage at the high end of our
baseline expectation
Capital Deployment: Disciplined
capital deployment with a
roadmap to increased accessible
cash and dividend growth

200-400bps of EPS
1
Leverage

~200bps dividend
2
yield today
Double Digit Total
Shareholder Return

1
2
26

As reported on a constant currency basis.

Based on closing stock price on January 8, 2016.
34th Annual J.P. Morgan Healthcare Conference | January 11, 2016

NON-GAAP RECONCILIATION TABLES

NON-GAAP RECONCILIATION TABLE

28

34th Annual J.P. Morgan Healthcare Conference | January 11, 2016

NON-GAAP RECONCILIATION TABLE

29

34th Annual J.P. Morgan Healthcare Conference | January 11, 2016

NON-GAAP RECONCILIATION TABLE

30

34th Annual J.P. Morgan Healthcare Conference | January 11, 2016

NON-GAAP RECONCILIATION TABLE

31

34th Annual J.P. Morgan Healthcare Conference | January 11, 2016

NON-GAAP RECONCILIATION TABLE

32

34th Annual J.P. Morgan Healthcare Conference | January 11, 2016

NON-GAAP RECONCILIATION TABLE

33

34th Annual J.P. Morgan Healthcare Conference | January 11, 2016

NON-GAAP RECONCILIATION TABLE

34

34th Annual J.P. Morgan Healthcare Conference | January 11, 2016

NON-GAAP RECONCILIATION TABLE

35

34th Annual J.P. Morgan Healthcare Conference | January 11, 2016

NON-GAAP RECONCILIATION TABLE

36

34th Annual J.P. Morgan Healthcare Conference | January 11, 2016