Medtronic 2009 Annual Report Download - page 28

24 Medtronic, Inc.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
(continued)
the launch in the U.S., the Attain Ability left-heart lead is
commercially available in every major market in the world.
• Our recent investments in two breakthrough atrial fibrillation
therapy systems. In November 2008, we acquired CryoCath
Technologies Inc. (CryoCath), a medical technology company
that develops cryotherapy products to treat cardiac
arrhythmias. CryoCath’s Arctic Front product is a minimally
invasive cryo-balloon catheter designed specifically to treat
atrial fibrillation and is currently approved in certain markets
outside the U.S. In addition, in February 2009, we acquired
Ablation Frontiers, Inc. (Ablation Frontiers), a company that
develops RF ablation solutions for treatment of atrial
fibrillation. Ablation Frontiers’ system of ablation catheters
and RF generator is currently approved in certain markets
outside the U.S. See Note 4 to the consolidated financial
statements for additional information.
• Our ability to grow consistently with the market. Our growth
in CRDM has been and will continue to be contingent upon
continued market growth and our ability to increase our
market position. The CRDM market is characterized by
significant competition, and in fiscal year 2009, we believe
that Medtronic’s growth has been slightly slower than that of
the overall market.
Spinal Spinal products include thoracolumbar, cervical, interbody
devices, bone graft substitutes and biologic products. Spinal net
sales for fiscal year 2009 were $3.400 billion, an increase of 14
percent over the same period of the prior fiscal year. Foreign
currency translation had an unfavorable impact on net sales of
approximately $11 million when compared to the prior fiscal year.
The growth in fiscal year 2009 was partially driven by the third
quarter fiscal year 2008 acquisition of Kyphon Inc. (Kyphon), which
generated revenue of $609 million and $298 million in fiscal years
2009 and 2008, respectively. See below and Note 4 to the
consolidated financial statements for further discussion about the
acquisition of Kyphon.
Core Spinal net sales for fiscal year 2009 were $1.951 billion, an
increase of 4 percent when compared to the prior fiscal year.
Growth in the period was primarily driven by continued acceptance
of our products for the thoracolumbar region of the spine.
Thoracolumbar net sales growth for fiscal year 2009 was driven
by net sales of the CD HORIZON LEGACY family of products (CD
HORIZON) outside the U.S., and net sales growth in the U.S. was
augmented by demand for our CD HORIZON LEGACY PEEK Rod
System, which allows for a less rigid implant as compared to
traditional metal rod systems. CD HORIZON is designed to provide
procedural solutions for degenerative, deformity or trauma
applications using color coded implants, unique minimally invasive
instruments and ergonomic designs. Net sales growth in the U.S.
was also driven by our MAST family of products, which includes a
comprehensive offering of minimal-access procedural solutions.
Our market share in the Core Spinal business continues to
experience pressure from the proliferation of smaller, public and
privately held companies competing in this market. In addition,
Core Spinal net sales growth for the fiscal year was positively
impacted from our joint venture with Shandong Weigao Group
Medical Polymer Company Limited (Weigao). The joint venture
entity, which distributes Medtronic’s spinal products and
Weigao’s orthopedic products in China, commenced operations
in September 2008.
Biologics net sales for fiscal year 2009 were $840 million, an
increase of 3 percent when compared to the prior fiscal year. This
increase was primarily driven by worldwide net sales growth of
INFUSE Bone Graft in the first quarter of fiscal year 2009. Net sales
of INFUSE Bone Graft during the remainder of fiscal year 2009
were flat because of the negative impact of several external
factors including: a public health notice from the FDA regarding
off-label use of recombinant human bone morphogenic protein
in the cervical spine that was issued in July 2008, a previously
disclosed government investigation, negative newspaper stories
and a whistleblower lawsuit filed against a number of spine
surgeons and distributors of INFUSE Bone Graft. INFUSE Bone
Graft contains a recombinant human bone morphogenetic
protein, or rhBMP-2, that induces the body to grow its own bone,
eliminating the need for a painful second surgery to harvest bone
from elsewhere in the body.
Kyphon net sales for fiscal year 2009 were $609 million, an
increase of 104 percent when compared to the prior fiscal year.
Kyphon was acquired in the third quarter of fiscal year 2008 and
therefore net sales for the prior period only included six months
of net sales. Kyphon net sales were driven primarily by continued
worldwide acceptance of balloon kyphoplasty procedures for
treating vertebral compression fractures. Balloon kyphoplasty,
using Kyphon instruments, is presently used primarily by spine
specialists, including orthopedic surgeons and neurosurgeons,
interventional radiologists and interventional neuroradiologists,
who repair compression fractures of the spine caused by
osteoporosis, cancer, benign lesions or trauma, through minimally
invasive spine surgeries.