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2015 Corporate Sustainability Report

Christian Wübbena, chronic pain patient with St. Jude Medical neurostimulator
Christian Wübbena, chronic pain patient with St. Jude Medical neurostimulator

Our Company

Letter from our CEO

Michael T. Rousseau, President and Chief Executive Officer of St. Jude Medical

As we celebrate 40 years of transforming patients’ lives, I am proud of the achievements St. Jude Medical and our employees around the world have made, bringing next-generation medical technologies to treat expensive epidemic diseases and improving the quality of life for patients worldwide.

Our mission also encompasses our commitment to addressing the complex issues of operating a global business in environmentally sustainable, socially responsible ways. This means considering the needs of our stakeholders around the globe, ranging from the medical professionals who use our products to improve patient outcomes and reduce costs, to the shareholders who expect us to return value on their investments. They include the agencies we work with so that we can meet or exceed regulatory requirements, and the suppliers we rely on to maintain the high standards we expect. Also important to us are the communities where our employees live and work; we strive to contribute through our financial support of important causes as well as the volunteer projects our employees undertake.

We believe it is essential to solve today’s pressing health care challenges without compromising the needs of future generations. Our efforts to protect the environment include reducing energy and water consumption, and encouraging participation in recycling programs. At our Irvine, Calif., manufacturing facility, for example, landscaping changes and irrigation improvements allowed us to cut our water use per unit by half between 2012 and 2015. Also in 2015, we received the Chelsea Santucci Greenovation Award from Kimberly-Clark recognizing a recycling program at three of our Minnesota manufacturing facilities, where we have recycled more than 2 million plastic gloves over the past two years. As always, St. Jude Medical is committed to meeting and exceeding the highest quality and ethical expectations.

As part of our commitment to corporate citizenship, we partner with organizations that work to improve access to health care. The St. Jude Medical Foundation, an independent organization funded by St. Jude Medical, provides funding to improve public awareness of cardiac and chronic pain conditions and the device therapies that change lives. For example, for almost three decades the St. Jude Medical Foundation has partnered with Children’s HeartLink to deliver high-quality complex care for children living with heart disease in underserved parts of the world. Together, we focus on providing clinical training to health care professionals in high-need hospitals.

All of these goals are achieved thanks to the efforts of our employees, a strong team of 18,000 people around the world whose contributions are the foundation for our success. We foster a culture of diversity and inclusion and invest in skills and people development to fuel innovation, nurture careers and drive our company forward.

These are exciting times for St. Jude Medical and our industry. I want to thank our employees, customers and all of our stakeholders for the support and trust they place in us every single day and for being a part of our rich 40-year legacy of saving and improving lives.

Michael T. Rousseau, President and Chief Executive Officer

Selected Financial Information

Bar graph shows net sales (in billions, U.S. Dollars)Bar graph shows operating profit (in billions, U.S. Dollars)

Bar graph shows diluted net earnings per share (in U.S. dollars)Bar graph shows research and development expense (in millions, U.S. Dollars)

Pie chart shows 2015 net sales by product categoryPie chart shows 2015 net sales by geography, United States and International

Globally, we employ approximately 18,000 people, maintain facilities in eight countries, and sell our products in more than 100 countries. We provide life-saving technologies to patients all around the world. Learn more about our global presence. Meet the people who lead our executive leadership team

Our Vision and Mission

At St. Jude Medical, we take on some of the world’s biggest health care challenges. We are committed to transforming the treatment of expensive epidemic diseases where medical device innovation can save and improve lives and drive down the overall cost of care. Read more about our vision and mission

Every business day more than 20,000 people are impacted by our lifesaving technologies. We are laser focused on developing product portfolios and novel, customized disease-management solutions addressing five key areas:

  • Atrial fibrillation
  • Heart failure
  • Neuromodulation
  • Traditional cardiac rhythm management
  • Cardiovascular

Learn more about what we’re doing to address the health and economic challenges of epidemic diseases around the world

Product Innovation

Atrial Fibrillation

Flexability™ Ablation Catheter, first FDA-approved irrigated ablation catheter with flexible tip

An estimated 33.5 million people worldwide have atrial fibrillation, the most common type of cardiac arrhythmia. With clinical- and evidence-based expertise in cardiac arrhythmias, we offer unparalleled solutions. Our market-leading technology is the most comprehensive electrophysiology (EP) medical device portfolio in the business. Our new EnSite Precision™ cardiac mapping system (available in Europe and pending 510(k) approval in the United States) is a next-generation platform with sensor-enabled catheters and an advanced user interface. This system was designed in collaboration with key opinion leaders around the world, and the initial feedback validates our confidence in this new system to enable physicians with precise information to treat cardiac arrhythmias.

In 2015, we significantly improved our ablation catheter offerings in our cardiac arrhythmia product portfolio with the commercialization of two new catheters. The TactiCath™ Quartz contact-force sensing irrigated ablation catheter pioneered the ability to give physicians a real-time, objective measure of the force applied to the heart wall during a cardiac ablation procedure to treat paroxysmal AF. Our best-in-class FlexAbility™ ablation catheter was designed with feedback from leaders in the global EP community to enhance the quality of care for patients during ablation procedures. These product introductions have allowed physicians to tailor patient therapy for optimized outcomes and position us as the provider of choice to EP customers.

Heart Failure

HeartMate 3™ Left Ventricular Assist System

Heart failure (HF) is one of the most costly diseases in the world, affecting more than 26 million people around the world. St. Jude Medical is developing technologies that position us to become the global medical technology leader in heart failure management. Our portfolio allows us to uniquely enable patient care from early symptoms to advanced stages, regardless of heart failure type.

The CardioMEMS™ HF System is the cornerstone of our heart failure program. We are the only company with an FDA-approved remote hemodynamic monitoring device. In the November 2015 edition of The Lancet, prospective data from the CHAMPION study showed that after a mean of 31 months of follow-up, heart failure patients managed with the CardioMEMS HF system had a 48-percent reduction in heart failure hospitalizations compared to patients managed with the current standard of care. The data confirms the benefits of our pioneering technology and has driven strong clinical acceptance. However, with new innovative technologies, reimbursement can lag behind regulatory approval. We are pursuing a National Coverage Determination from the Centers for Medicare & Medicaid Services to ensure that indicated patients have access to the CardioMEMS HF system. We expect this process to be completed by the end of 2016 and continue to develop this new market by expanding clinical evidence to drive adoption and reimbursement globally.

Our acquisition of Thoratec—the largest in our history—positions St. Jude Medical as the market leader in left ventricular assist devices (LVADs). In 2015 we announced CE Mark for the HeartMate 3™ Left Ventricular Assist System,* a significant new product for our heart failure portfolio. We expect the LVAD market to continue to be an attractive growth market in 2016, and we expect to continue developing the market, since currently only about 10 percent of eligible patients receive this life-saving therapy. We have been pleased with the results of our HeartMate 3 LVAS launch internationally, and the HeartMate 3 LVAS U.S. IDE clinical study, MOMENTUM, is making good progress with patient enrollment.

Our focus is on providing physicians with the technologies they need to save and improve lives. We received CE Mark approval in 2015 to add magnetic resonance conditional labeling* for our Quadra Assura™ CRT-D and Quadra Assura MP™ CRT-D with MultiPoint™ Pacing technology.* Adding MRI availability to our market-leading quadripolar technology advances options for patients and ensures future access to diagnostic imaging they may need in their heart failure treatment. With approximately 23 million people worldwide living with congestive heart failure, and 2 million new cases diagnosed each year, development of new treatments is expected to play a major role in managing this complex disease in the future. St. Jude Medical is rising to the challenge, and with our broad heart failure portfolio, is uniquely positioned to be the global leader.

Neuromodulation

Drawing shows stimulation patterns of Proclaim™ Elite SCS system

An estimated 1.5 billion people worldwide struggle with chronic pain—some estimates claim one in five people live with this epidemic disease. We offer the most comprehensive neuromodulation portfolio on the global market for the treatment of chronic pain. Through internal innovation and strategic acquisitions, we have developed therapies including our Axium™ Neurostimulator System (approved by the FDA in February 2016), spinal cord stimulation (SCS) and dorsal root ganglion stimulation. In addition, St. Jude Medical is the only medical device manufacturer to offer radiofrequency ablation. These technologies, supported by compelling clinical data, offer unique proprietary solutions that manage chronic pain in effective new ways.

In 2015, the St. Jude Medical™ Invisible Trial System received approval in the U.S. and Europe. The system is fully wireless and uses Apple™ mobile digital device technology for both the patient and physician controllers. Developed with physician and patient feedback, the system is designed to offer patients an improved and discreet SCS trial experience. Also approved in Europe in 2015, the Proclaim™ Elite Spinal Cord Stimulation System is the first and only upgradeable and non-rechargeable SCS system approved to deliver Burst stimulation.* Our proprietary Burst waveform* is designed to mimic the body’s natural pattern of neuron signaling, providing an alternative therapy method for chronic pain. We’re also making our products easier for patients to use by employing familiar Bluetooth® wireless technology and Apple™ mobile digital devices to control the Proclaim Elite SCS system. These technologies allow patients to interact with their devices conveniently and manage their chronic pain treatment with minimal disruption to their daily life.

SUNBURST (Success Using Neuromodulation with BURST) trial results analyzing our Burst technology* demonstrated a reduction or elimination of paresthesia (a tingling or prickling sensation) in 91 percent of patients. Patients also reported superior pain relief with Burst therapy. Our plan to establish Burst as the dominant spinal cord stimulation waveform across rechargeable and rechargeable-free devices is central to our goal of expanding treatment options for patients living with chronic pain.

*CAUTION: Investigational device. Limited by Federal (United States) law to investigational use. Note: Apple is a trademark of Apple, Inc. Bluetooth is a registered trademark of Bluetooth SIG, Inc.

Stakeholder Engagement

Our stakeholders include the people around the world who impact and are affected by our business. Feedback from our stakeholders is important as we continue to expand and focus on our sustainability initiatives and reporting. Topics covered in this report represent the issues that our stakeholders have said are most impactful to our business. We encourage readers of this report to provide comments and suggestions. Contact us about this report.

  • Community: We contribute to the communities where our employees live and work.
  • Customers: Our customers are physicians, hospital administrators and other medical professionals who serve patients in our areas of focus
  • Employees: The success of our business depends on the contributions and engagement of our employees.
  • Environment: As responsible stewards of the environment, we are careful about how we impact the planet and use natural resources in our manufacturing, distribution and offices.
  • Investors: The individuals and institutions who own our stock expect us to return value on their investments.
  • Patients: Ultimately, our products must be safe and effective to serve their intended purpose of saving and improving lives.
  • Regulators: Our industry is heavily regulated and we work with agencies to meet or exceed adherence to standards.
  • Suppliers: We partner with a diverse supplier base that maintain the same high level of ethical standards that we expect of our business.

Corporate Governance

St. Jude Medical has a unitary, or one-level board structure, which is currently comprised of 10 directors, including Mr. Daniel J. Starks, who became executive chairman of the board in 2016 following 11 years as the board’s chairman and the company’s chief executive officer, Mr. Michael T. Rousseau, who has served as a member of the board of directors and as St. Jude Medical’s president and chief executive officer since January 2016, and eight independent, non-executive/non-employee directors.

As a publicly traded, NYSE-listed company, St. Jude Medical complies with the New York Stock Exchange (NYSE) listing standards. As stated in our annual proxy, the board undertakes an annual review of director independence. As part of that process, each February the board reviews any transaction or relationship between each director (or any member of his or her immediate family) and the company, including any transaction and relationship described in the responses of the directors to questions regarding employment, business, familial and other relationships with the company and its management. At the conclusion of the most recent such review, the board determined that all directors, except Mr. Starks and Mr. Rousseau, are independent under the company’s Principles of Corporate Governance and bylaws and the NYSE listing standards and have no material relationships with the company other than their positions on the board of directors.

Led by our board of directors, St. Jude Medical takes into account economic, environmental and social factors to guide the manner in which we conduct business. The board of directors believes that sound principles of corporate governance are critical in order to achieve company success and secure the confidence of our shareholders, customers, members of the medical community and employees.

Learn more about St. Jude Medical leadership and governance, or contact our corporate secretary at:

St. Jude Medical, Inc.
Attn: Corporate Secretary
One St. Jude Medical Drive
St. Paul, MN 55117 USA

Public Policy

At St. Jude Medical, we recognize the impact that public policy decisions have on global health care. To advance medical device technology, we advocate for public policies that will position us to be successful over the long term. Because of this, we support the development of sound public policy through direct advocacy. We also support leaders who understand our issues through lawful corporate contributions and sponsorship of the St. Jude Medical Political Action Committee (SJM PAC).

The SJM PAC is a nonpartisan political action committee of St. Jude Medical employees. The committee seeks to educate and mobilize employee political involvement and support candidates who understand our industry. The SJM PAC is governed by a board of directors comprised of employees representing our operations in the U.S. The SJM PAC guidelines include criteria for disbursements by the SJM PAC to federal candidates. The SJM PAC does not contribute to presidential elections, ballot initiatives or make direct independent expenditures.

Where allowed, St. Jude Medical may make contributions to state and local candidates or party committees. All contributions are evaluated on a case-by-case basis.

St. Jude Medical adheres to all state and federal laws regarding disclosure of corporate political contributions and disclosure of SJM PAC contributions. In the interest of transparency to our shareholders and other interested stakeholders, we have developed an annual Political Contributions and Related Activity Report. This report provides detailed information on U.S. political contributions made by St. Jude Medical and the SJM PAC. Detailed regular disclosure of our SJM PAC contributions is also available at fec.gov.

We submit quarterly reports disclosing our U.S. lobbying activities and support for specific legislation that promotes medical technology innovation, patient access and other relevant issues. The reports are available at disclosures.house.gov.

St. Jude Medical also participates in a number of trade associations that advocate for legal, regulatory and economic initiatives that advance patient access to medical technology.

Questions about SJM PAC or political contributions should be directed to:

St. Jude Medical, Inc.
Attn: VP, Corporate Strategy
One St. Jude Medical Drive
St. Paul, MN 55117 USA

About this Report

St. Jude Medical recognizes the importance of reporting on corporate sustainability to our stakeholders. This is the fifth year we have reported on key sustainability metrics and business practices. During the development of this report, we consulted the Global Reporting Initiative’s (GRI) Sustainability Reporting Guidelines. We intend to apply the same continuous improvement processes to ongoing sustainability reporting that we apply to the other initiatives within our company, and will expand our reporting as our programs further develop.

This report is intended for global use. Some statements in this report about products, procedures or particular regulations and employee benefits may differ by country.

The data presented in this report represent calendar year 2015 information, unless otherwise noted. This report includes information on global St. Jude Medical™ operations. A complete list of our subsidiaries is included in our 2015 Annual Report on Form 10-K for the fiscal year ending January 2, 2016.

For more information about the St. Jude Medical Corporate Sustainability Program, contact us at:

St. Jude Medical, Inc.
Attn: External Communications/Sustainability
One St. Jude Medical Drive
St. Paul, MN 55117 USA
csr@sjm.com


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