Corporate Investment in StartUps Rachael Scherer Vice President

Corporate Investment in Start-Ups Rachael Scherer Vice President, Marketing Medtronic, Inc.

Medtronic: the Company Medtronic Mission “To contribute to human welfare by application of biomedical engineering in the research, design, manufacture and sale of instruments or appliances that alleviate pain, restore health and extend life. ”

Medtronic History Founded in 1949 as a medical equipment service company

Medtronic Solutions Restore Health Atrial Arrhythmias Heart Valve Disease Sinusitis Peripheral Vascular Disease Acid Reflux Enlarged Prostate Scoliosis Essential Tremor Tachyarrhythmia Parkinson’s Disease Coronary Vascular Disease Diabetes Degenerative Disc Disease Heart Failure Spasticity Hydrocephalus Bradyarrhythmia Incontinence Chronic Pain Dystonia Unexplained Syncope (Fainting)

We Diversified Into Attractive Markets Balanced Growth US$12. 3 Billion Net Sales (Fiscal Year 2007) Cardiac Surgery 6% Diabetes ENT 4% CRDM 47% 6% Vascular 8% Neurological 9% Spine/Navigation 20%

Medtronic Global Reach Canada Europe USA Middle East/ Africa/India Latin America • Sales in 120 Countries • Offices in 44 Countries • 36, 000 employees world wide Eastern Europe Central Asia Pacific International § Western Europe § Canada § Emerging Markets § Latin America § Eastern Europe § Middle East/Africa/India Asia-Pacific § Japan § Australia § China § ASEAN § Korea

Ingredients to Drive Growth are in Place In billions $22 B - $24 B $12 B + US INT’L

R&D Spending Continues To Increase $1 Billion + $191 Million FY 95 FY 07

Productive R&D = New Products 2/3 of revenues are from products introduced within the past 2 years

Medtronic: the Investor Medtronic Mission “To contribute to human welfare by application of biomedical engineering in the research, design, manufacture and sale of instruments or appliances that alleviate pain, restore health and extend life. ”

What is Required to Sustain Growth? Annual Incremental Revenue Required to Sustain 15% Growth ($ in Billions) $4. 7 $4. 1 $3. 5 $2. 7 $3. 1 Where Does This$2. 3 Growth Come From? $1. 3 FY $1. 5 $1. 8 $2. 0

We Have Ample Financial Flexibility Free Cash Flow and Cash Available for Investment Free Cash Flow (Billions) Cash Available for Investment (Billions) Free Cash Flow (Operating Cash Flow less Cap Ex) Cumulative Cash Balance

We Diversified Into Attractive Markets Balanced Growth US$12. 3 Billion Net Sales (Fiscal Year 2007) Cardiac Surgery 6% Diabetes ENT 4% CRDM 47% 6% Vascular 8% Neurological 9% Spine/Navigation 20%

Evaluating New Growth Platforms, Strengthening Existing Growth Platforms • “White Space” will augment top growth, diversify business, geographic and payor mix • Aggressive global scouting efforts continue to identify new technologies • Minority investment portfolio provides early access to new technology • We will identify new business platforms where we add value and leverage Medtronic strengths Market Development Indication Expansion Market Share Geographic Expansion New Markets

Business Development Strategy • Disruptive technologies in therapeutic areas of interest • Extension of existing technologies into new therapeutic areas • Drug partnering • Procedure solutions (how do we make therapies more efficacious, safer, less invasive and more convenient) • Sensors and closed loop systems • Miniaturization

Minority Investment Strategy • Extend eyes and ears for key emerging technologies – Board seat or board observer seat – Membership on scientific advisory board • Create bonds to enhance ability to negotiate future investments – Development agreements – Distribution rights • Gain certain option rights – Right of first offer – Right of first refusal Medtronic currently has ~$200 M in active investments in over 70 companies

Minority Investment Examples Past & Present Equity Investments: • Volcano / IVUS First investment in 2002, Licensing agreement in 2003 Equity financing used to develop IVUS products Up-front payment for technologies used in Medtronic products Volcano completed successful IPO in mid-2006; Medtronic still a shareholder. • Cardio. MEMS / Wireless Sensing & Communications In 2005, Medtronic made entered into a license and joint product development program. Equity investment and series of milestone payments Medtronic has overall responsibility & bears cost for clinical and regulatory Cardio. MEMS began IPO process, but has opted to remain private, for now • Spinal Dynamics / Artificial Disk Initial investment in 2001, Medtronic became exclusive OUS distributor of Bryant disc In 2003, Medtronic acquired Spinal Dynamics for $270 M Bryant disc expected to go to FDA Panel this Fall

Case study: Neurologix Collaboration Neurologix, Inc. And Medtronic, Inc. Agree To Develop Gene Therapy Infusion Catheters; Medtronic Makes A Further $2 Million Equity Investment In Neurologix – Medtronic will manufacture, delivery devices for Neurologix's Parkinson's disease and temporal lobe epilepsy clinical programs – Two companies will have a revenue-sharing arrangement – Medtronic increased its equity investment in Neurologix by $2. 0

Case study: Alnylam Collaboration • Scope – Collaboration to develop novel si. RNA-device treatments for neurodegenerative diseases • Begin with exploration of one target/disease: huntington in Huntington’s Disease (HD) • Roles Alnylam • Discovery and early development of si. RNA component – To “Clinical Proof of Concept” ≈ completion of Phase IIa Medtronic • Late-stage development of si. RNA component • All development of Device component • Commercialization of si. RNA-Device combination

Minority Investment Examples Past & Present Equity Investments: • Volcano • Cardio. MEMS • Spinal Dynamics • Neurologix Collaboration (case study) • Alnylam Collaboration (case study) “Larger than Life” deals: • Minimed • Vidamed

Process Clear fit with MDT business White Space Opportunities Investment Committee s s as itie e Id tun r o p p O Corporate Development Strategy Committee s ties a i e Id tun or p Op Medtronic Business Units s tie a i e Id tun or p Op s Several Sources

Acquisition Goals Acquire new strategic platforms focused on treatment of chronic disease and Acquire businesses or product lines complimenting or supplementing existing businesses Enhance Revenues!

Acquisitions Strengthen/Broaden Existing Business Cardiac Surgery Vascular Surgical Navigation • Bio. Medicus 1990 • Instent 1996 • Intelex 2000 • DLP 1994 • AVE 1999 • Odin 2005 • Avalon 1994 • Percu. Surge 2001 • Electromedics 1994 • TVI 2003 • Carbon Implants 1994 • Radius 2004 • Avecor 1999 • Angio. Link 2004 • Coalescent 2004 CRDM • Vitatron 1986 Neuro Surgery • Midas Rex 1998 Patient Mgmt • Pace. Art 2001

Acquisitions Expand into New Strategic Platforms Prior Acquisitions Heart Valves – J&J’s Tissue Valve Business (1988) Cardiopulmonary – J&J’s Oxygenator Business (1988) Current Interests Biotechnology Cancer Dental Coronary Vascular – Versaflex (1989) / IMI (1989) Hearing Neuro/Gastro/Uro Diagnostics – Synectics/Dantec (1994) Hypertension Peripheral Vascular/AAA – MIS (1995); Aneu. Rx (1997) External Defibrillators – Physio Control (1998) Obesity Ophthalmology Spinal – Sofamor Danek (1999) Orthopedics Neurosurgery – PS Medical (1995), SNT (1999) Urology/Gynecology ENT – Xomed (1999) Stroke Diabetes – Mini. Med/MRG (2002) BPH – Vida. Med (2002) GERD – Endonetics (2002) Artificial Discs – Spinal Dynamics (2003)

Why Would You Want Medtronic as an Investor? • Expertise of entire Medtronic science organization available to our partners (with/without CDAs) • Medtronic will keep ownership below control position (unless investment moves to acquisition) • Medtronic invests for strategic reasons. We don’t like to lose $$, but generally run our portfolio to learn about technology and markets • Medtronic won’t tell you how to run your business; generally looks to be Board observer, not Board member