St. Jude Medical Inc. - Analyst/Investor Day

 |  About: St. Jude Medical, Inc. (STJ)
by: SA Transcripts

Daniel J. Starks

Okay. So it is the top of the hour. I'd like to welcome everyone to the St. Jude Medical 2012 Investor Conference. And I would like to say happy Go Red Day to everyone as we mark today to increase awareness of women's heart health.

For those who are participating by Internet, my name is Dan Starks. For everyone, my comments, the comments of all of the other presenters, all of our answers to questions are subject to the typical forward-looking statement disclaimer.

So our agenda today is, first, to give you the highlights of our growth program and, secondly, to do so in a concise fashion. So we will get you out of here by 1:45, and our aspiration is to overachieve that goal and get you out of here sooner. Our presentations will be tight. We will be liberal on Q&A, but our goal is to get you out of here this year significantly earlier than last year. This is in response to your feedback from last year.

So I will start with a bit of an overview then turn the podium over to my colleague, Frank Callaghan. We've indicated as a third agenda item, new growth drivers in neuromodulation, as part of our effort to stay focused on what's most impactful to our growth story in 2012. We're not going to present prepared remarks on neuromodulation, but that is not to deviate from our continued focus, our continued investment in neuromodulation. In our first Q&A panel, the President of our Neuromodulation business, Rohan Hoare, will participate and be happy to answer any questions you have about neuromodulation. After that, we'll take a 20-minute break, then we'll come right back to dig in to the cardiac rhythm management, follow it with atrial fibrillation. At about 11:45 today, we will have ready for you a buffet lunch for any of you who care to help yourselves and bring plates back in here. We'll take a very short break to facilitate gathering lunch, but really we're focused on getting you out of here earlier this year, and we're not going to take a dedicated lunch break.

So with that, let me jump into our growth program. And our starting point each year is to do a little bit of a review of our scorecard, our report card and how we did this last year. So we're never running from our history. We're always holding ourselves accountable to our history, holding ourselves accountable to our track record. So how did we do in 2011? In the first half of 2011, the year started off just great. In the second half of 2011, there were -- we were hit by significant negative developments in the greater MedTech market and also specifically in the ICD market. All of this resulted in our self-assessment being that our results in 2011 were mixed. Now for those of you who are as compulsive and detailed as we are, you already know everything on this slide. For those who may be a little more casual about following our business, the left-hand column shows you the numbers we started out with, with our guidance and our fourth quarter earnings result, our earnings conference call in 2011. The right-hand column shows where we ended up. What will jump out is the difference between our sales expectations in the cardiac rhythm management space and versus our actual results in the sales in the cardiac rhythm management space. One might recall that at this time last year, we thought the CRM market itself would grow at a low-single-digit rate. We expressed that as 2% to 4%. That didn't happen particularly in the second half of the year, there was significant deterioration in the global CRM market. We need to see the final participants' year end numbers to finalize our market model, but we estimate that the market shrank about 3% here. So that was about a 6- or 7-point difference in growth of the market at our participation in the market. Each point of change in market growth rate is worth about $30 million, so you can see that, that delta alone cost us about $200 million in our expected sales results. What also would jump out from this would be that -- but for that, there was -- we still delivered EPS within our original guidance range. And we were able to offset about half of that CRM sales shortfall. We also were able -- you could see that in the way we set our guidance a year ago, we left the opportunity for accelerated share gain from our quadripolar CRT-D program as upside to our guidance. And so you can see there were a number of conservative measures in the original guidance. We still hit the original guidance. If we had -- if we had -- if the market growth itself had been more along the lines of our expectations, you can see that we would have significantly overachieved the original guidance.

Then moving on. So that was a quick reference to EPS as delivered and sales as delivered in 2011. But what was more important from a growth story perspective is the progress we've made continued to advance our growth drivers. Because whether we -- sales came in at the expected level last year or not, the pieces and what we were focused on as a leadership team and what we were encouraging investors to focus on was the pipeline of new growth drivers. And there, we rate ourselves highly. We are making good progress toward accelerating sales growth. Our guidance in 2012 reflects an expectation of accelerated organic constant-currency sales growth. And we expect to continue to improve total sales growth rate after 2012.

So in -- this slide sets up the rest of the day. And what we'll work to do is we'll work to give you some additional confidence, some additional insights, some additional information to help you firm up your own assessment of the credibility of our sales guidance for 2012. But more importantly than that, we will work to make visible what is highly likely to improve during 2012 to give us a realistic opportunity to deliver a higher rate of sales growth in 2013 and beyond. And the 3 points here, we're assuming in our guidance this year, as we mentioned in our call last week, we're assuming continued shrinkage in the global CRM market this year. As soon as the global CRM market just stabilizes, we don't need any growth from it. As soon as it just stabilizes, that's a significant benefit to our sales growth profile. Each of the new growth drivers that already are in the market are small but growing. Their impact on our growth rate naturally accelerates here year-over-year. And then the part that's probably the most fun to talk about is the major new products that are coming into the market partly this year and partly next year that will add to the momentum that you already can see gathering.

Behind this is the topic that investors generally give us high credibility for which is our continued reduction of costs, improvements of productivity. So we don't talk about this every conference call. We don't talk about this in each of our meetings. But this continues to be an intense focus of ours. It continues to be an area where we're executing very nicely and smoothly, seamlessly. The topic of our consolidated platform in CRM is one that we used to talk about quite a little bit. And I thought it was worth resurrecting briefly this morning to just to point out that what you see in the productivity of our research and development pipeline in CRM, what you see in the innovation that we're putting into the market, for example, the quadripolar CRT-D. And then, Eric Fain will talk more about continued downsizing. He'll talk more about what we do with this quadripolar platform as it evolves in the multipoint pacing, not just quadripolar but then using the quadripolar platform for multipoint pacing and the advantages of multipoint pacing. All of this comes out of the hundreds of millions of dollars and the 8 years of development that we put into our consolidated platform. And so we have significant improvements in quality with this consolidated platform. We have significant improvement in the efficiency of our R&D. And we have significant improvements in the manufacturability of our entire high and low-voltage product line. All of which is reflected in continued strength of gross margin and opportunity to get to the second point here, which is to begin to manufacture more of our devices and cost advantage areas -- cost advantage locations. We couldn't do that with more complicated manufacturing requirements. We now can do that with the simpler manufacturing requirements of our consolidated platform. So you can see, we really have a virtuous cycle going as a result of the advances with our consolidated platform. We have a virtuous cycle going as a result of our expansion in manufacturing in cost advantage locations. And in the past, we've talked to you about our ASP implementation. Now we don't talk about ASP implementation. Now we're just leveraging the value of that infrastructure to centralize more of our operations where it makes sense and to get more synergy from the different parts of our business. All of this will get -- sets us up. So that as we start to think about 2013, we have in-hand cost reduction totaling more than $150 million. It will be reflected in various parts of our income statement. And then on the second point here of R&D as a percent of sales, keep in mind that at the beginning of 2011, we told you that we were increasing R&D as a percent of sales to support the breadth of our product development pipeline. As more of these growth drivers that we are invested in that our non-revenue generating in 2011 and will continue to be either non-revenue or minimal revenue-generating in 2012, as these new growth drivers start to contribute to sales growth, one could see that as we continue to expand investment in R&D, in future years, it will be with a reduction in R&D as a percent of sales. And so here's more leverage to the income statement without any sacrifice to investment and continued long-term growth. So we're setting ourselves up for not only maintenance of investment and product pipeline, but we're also setting ourselves up, so that in future periods, we can expect good EPS leverage.

So this is all I'm going to say about 2011, except to answer questions that you might have later on the topic. We're glad to see 2011 over. We -- during 2011 with tough conditions, we continued to focus on making sure that our long-term health was robust, and that we were positioned to win. And as a result of all of that, now we're happy to spend the rest of the day talking to you about what we've done to make ourselves well positioned to win in 2012.

So with -- I'll just touch very briefly on demographics. This is kind of a motivator to us to say that, yes, there are ASP pressures. We expect continued ASP pressures. The lemonade in that lemon is pressures are -- ASPs are as big a concern as they are because the demographics are so favorable.

So in developed markets, populations are getting older. In emerging markets, populations are getting richer. The demand side of the equation is not an issue for us. The demand is growing, and will continue to grow for years to come. In -- and the second point here, when people will ask us what's our position with international markets, what's our position with emerging markets. And we see competitors following along in the footprints that we put down quite some time ago. We already are best-in-class in our immediate peer group, in the most relevant peer group with percent of business coming from global markets outside the United States. So if 55% of our revenue comes from global markets outside the United States, we have a great outlet and great leverage of our matured technologies in emerging markets and in less developed markets as point 1. As point 2, we hear some companies as they work to sort through what does one do with the difficult healthcare reform dynamics with difficult macroeconomic pressures, what does one do with respect to developed markets. Our answer to that is developed markets are the right place to bring disruptive technology. We have disruptive technology in all 4 of our business platforms, either already starting to come into the market or coming into the market this year or coming into the market in 2013. And it's a flow of multiple disruptive technologies coming into the market, all of which we'll talk about more during the remainder of our presentations today.

That segues into what sets us apart most of all from other companies in the MedTech space is the strategic value of our portfolio, of our business mix, of the impact and likely impact of the new growth drivers that we're invested in. So we haven't done what everyone else has done. We have stayed away from spaces that some of the other companies in the space have chosen to invest in. We've made sure to focus on getting synergy across all of the parts of our business franchises. Number one, we've made sure to have a good mix of fast following on the one hand; and on the other hand, pioneering. We've made sure to have a good mix of timing with -- which parts of our growth drivers will start to bear with the sweet spot of their growth coming in 2012 and in 2013, which additional growth drivers just start to get into the market in 2012 and 2013, and really will begin to be more reflected in sales results in future period. So all of that is among the distinctions of our product portfolio versus some others in the space. And then, additionally, we've stayed away, we intended to stay away from heavy capital equipment. It's a small percent of our business. It does have a place in our business, but we have minimal exposure to capital budget restrictions. We have minimal exposure to elective procedure, variability. And we -- when we make a decision to invest, we have been very disciplined in selecting investment opportunities where we think we have a credible opportunity to become a leader in this space with all of the cost advantages of that leadership position. We've made a point to invest in technologies where we're part of the solution to the dilemma of -- with demographics as they are, how can we possibly afford to pay for healthcare for all of these people. So we'll talk more about the value of our technology as compared with the cost of technology and how it is that we're saving money to healthcare budgets, and that we have been again very focused on investing in technology that wins on the comparative effectiveness standard.

So now we'll jump right into -- that was all just kind of set up. Now I'm going to give a quick overview of what we'll spend a lot more time talking about the rest of the day. So I'm not going to belabor any one of these points. I'm going to defer to division presidents, who will belabor points in their presentations as well as the physician speakers, who have been kind enough to come and enrich the discussion today.

So here, all I'm going to tell you, this is my only slide. But on the topic of transcatheter valves and renal denervation, Frank Callaghan and others will talk quite a little bit more about this. But the main takeaway is that we're already preparing our product launch plans. So this is 2012, transcatheter valves and renal denervation. Next year, we expect to begin preparing product launch plans at about this time or a little bit later in the year for our percutaneous mitral valve repair program. Now we're still going to keep some of the details of this program confidential, but Frank Callaghan will tell you more, tell you quite a little bit more about our TMVR technology program in his prepared remarks, so that this can start to live a little bit in your thinking as compared with just the buzzwords and the acronym.

Our PressureWire technology is nearing, coming into prime time in our view with the credibility and value of this technology demonstrated to the extent it has been not only by the FAME trial, but now the FAME II trial. So anytime that you can come to customers, anytime you can come to hospital administrators, anytime you can come to national payers and prove to them that if you pay us for our PressureWire technology, we can save you 14% net of that price you're paying us. And we can help you reduce death and heart attack by 34%. What's not to like? So that's a winner under the competitive effectiveness standard. We now have thousands of patients proving the truth of what I've just told you, and now it's a question of making this technology widely available, making the clinical data widely available, going through the additional processes required to develop the markets and bring FFR technology from about an 8% penetration of PCI procedures up to where it deserves to be, which would be a standard of care in a PCI procedure. So this technology is -- our PressureWire technology is set to become a strong contributor to our growth profile, and it works right with our OCT technology. And so putting all of these together into an integrated platform and making it always there, always on technology to assess lesions, to optimize stent placement, to verify the optimal stent placement before closing the procedure. All of that is what we're now starting to put into the market here in 2012. We just received FDA clearance to begin, offering this consolidated platform in the fourth quarter of 2011. You didn't see the benefit of it in our 2011 results. You'll start to see the benefit of it in our 2012 results and in 2013. And to give you a sense, we don't break the numbers out separately, but we can tell you that we have over a 60% share of the global market in FFR in the FFR space. And we can also tell you that we're on track to exceed a 20% share of the intravascular imaging market later this year. So these are starting to come into their own. And we -- as we -- as they become bigger contributors to our growth profile, we'll continue to give you more information about them. But now, it's on the short list of things to watch for 2012 that are working for us here and now.

The -- on PFO, whenever I think of PFO closure here in the last 6 weeks or so, it always reminds me of CardioMEM. It always makes me think, okay, we've got a lot of bet that we are invested in. We never thought they were all going to work. We -- and some -- and it would be completely realistic, and I don't know which ones in the future will surprise us on the negative side, which ones in the future will surprise on the positive side. But we'll go after all of them with the confidence that enough of them will work, that we will deliver the accelerated sales growth that we're committed to.

CardioMEMS has dropped off in the short term. PFO closure has come on in the short term. So the clinical data are still being analyzed. The clinical data are still confidential. But whereas a year ago, we said -- and we're invested in PFO closure for stroke indication, but we put it on the periphery with the -- it was a major milestone for us to complete enrollment in the RESPECT trial. There was a speculation that the trial might be terminated for futility, and clearly now that has not been the case. We've completed enrollment, and we're very much looking forward to completing the analysis of all the clinical data and presenting the clinical data as a landmark clinical trial at a major cardiology meeting later this year. The first opportunity would be the EuroPCR. We or may not be able to have the data completely developed and ready for presentation at EuroPCR. And if not at EuroPCR, then at a later similar major meeting this year.

The -- talking about stroke. We have 2 device approaches to the stroke space: the PFO closure and LAA closure. So -- and you can see again, we've got -- it's the balance of our portfolio that I'm happiest about. So on the PFO closure side, we have a major landmark, clinical trial but -- product not yet on the market. On the LAA closure side, we don’t have the landmark clinical trial yet. We've got product on the market, strong leading market share in Europe. And we still have the clinical piece to supply to have this growth driver come into its prime time. But you can see different details of where we are in different growth drivers, but good progress in all of them and a good mix of characteristics for the diversity of the market that we're going after. So LAA closure is something that is not in its prime but is still percolating.

Moving on to the pericardial stented tissue valve program. This is a growth driver that is in its prime. So again, we've got a good mix of what's working for us today, what is getting set up to work for us tomorrow, the Trifecta pericardial stented tissue valve product line is working for us today. You can see that in the correlation between our exceeding guidance and our cardiovascular franchise here. And you can see it in competitive reports of their surgical valve business losing steam. So yes, that is a correlation. But it's more than that, it's also a cause and effect.

This is a smaller part of our business moving on to the genetic defect, the structural heart repair that we purchased with our acquisition of AGA. Here, although it's a developed -- it's a mature technology, it's a very slow growth and develop markets. But this is exactly the kind of technology that's been vetted. It's best-in-class. It has above a 70% global market share. And now it's our challenge to take this to emerging markets where the populations to getting richer, and it's very much within their capability to afford this kind of technology for their pediatric population. So we expect some reasonable growth out of our ASD, VSD closure technology. And here, we're again percolating a new class of technology that is beginning to replace surgical clips and embolic coils available only from St. Jude Medical.

This has -- but still we're growing at a nice double-digit rate in the vascular plug business. But we had expected to get the AFP (sic) [AVP] 4 into the market towards the beginning of 2011. It's a very -- in the United States, it's a very tough regulatory environment. It hasn't happened yet, but we have visibility to lead us to believe that we'll get AVP 4, which will be the highest volume component of this vascular plug line, we expect to get it into the market here now in 2012. And even if things -- even though a number of these technologies get delayed, they all come eventually. And when they come, we get good growth of them. So we didn't get it in 2011. We do think we'll get it in 2012.

Speaking of delayed gratification, quadripolar CRT-D. So we -- it was a big frustration that we did not get this in the middle of 2011. On the other hand, we've got it now. And as I see, the impact of a motion in some of the investor comments is an interesting characteristic of just the way people approach these things. I see comments about the -- boy, this won't have the impact that it was going to have 2 quarters ago, and I just kind of shake my head and say, "So why not?" This is a technology that with over 30 clinical papers already presented in Europe with the European experience of the clinical value of the quadripolar CRT-D system. This is a technology, which according to the clinical data published in Europe, has demonstrated a 55% reduction in radiation. It has demonstrated a 28% reduction in implant time. It has been shown to result in a 70% decrease in surgical revision of a left heart lead. So why wouldn't that have an impact now that it's available today versus 2 quarters ago if -- so it's -- we're tremendously excited about this. This is a big deal to patients. It's a big deal to physicians. Yes, it takes time for people to get their minds wrapped around the clinical value of this kind of innovation. They do need to see it for themselves. We have a very tough scientific crowd that we sell to. They're going to use it. But as soon as a physician uses this device in a difficult anatomy, and -- so anecdotal feedback, as soon as a physician uses this in a patient where they said, "I was going to have to send this patient to surgery. And because of the quadripolar lead, I didn't." Just one of those, and then why wouldn't you give yourself the opportunity to provide that advantage to your next patient, your next patient, your next patient. This is going to become standard of care. Eventually, everybody will have it. This is a question now of the being first-to-market and how much share we can gain in our entire CRM portfolio, because we're first to market with something this disruptive. Add to that then, that if as one comes to see this as a truly disruptive technology and you say, "Okay, I think, I'll use your quadripolar lead." That means you're also choosing our ICD. You can't attach that lead to an ICD unless that ICD has the circuitry to interact with those 4 electrodes that's only a St. Jude Medical ICD. And that's a function of our hundreds of millions of dollars and 8 years investment in a consolidated platform. The competition can't follow us without putting up entirely new hardware platform. So we are years ahead with a disruptive technology in the biggest cardiovascular device market that I know of.

And so we'll give you a few, a few teasers here in our call last week telling you that, yes, there's a contracting cycle and, yes, there's nothing is ever as easy as it seems like. But the fact that we were a little bit conservative in the numbers that we threw out. But the fact that we already had in such a short period of time 150 new contracts in this difficult environment with attention to cost-effectiveness with all of our customers would help give a person some confidence, that I'm not just excited. And the St. Jude Medical management team, we're not deluding ourselves that we're actually nicely tuned in to the value of this technology and to the reception customers have for it, and to the opportunity for this to be huge in 2012 and in 2013 and to continue to be huge until all players in the space can add it to their product line.

So now, let me jump into atrial fibrillation. And what I wanted to talk about with this slide was, really, you remember that we were the first into this space. And we got into this space in 1992, supporting the first catheter maze procedures to cure chronic end-stage atrial fibrillation. And then one would think about along the way, this -- the AF market now makes me think of that adage of a frog in a room temperature pot of water where the heat is then turned on, and the frog doesn't jump out because the heat increases gradually enough that the frog boils to death without ever appreciating what had transformed over that period of time. That's a little bit -- that reminds me of the atrial fibrillation market because I would think about a number of investors in past times that said, "I'd been hearing about how big AF is going to be for years, and it just doesn't seem to get here." Well, if you might have missed it, but it's here. So it's a $2.5 billion market. And it's a $2.5 billion market growing at a double-digit rate. What else is like that in the MedTech universe? We are already there. It was a comparison, think about the U.S. pacemaker market. The U.S. pacemaker market in 2011 was about $1.7 billion, considerably smaller than today's AF ablation market. The U.S. pacemaker market shrank in 2011. We had a 28% or 29% share of the U.S. pacemaker market versus the AF market, $2.5 billion in size, growing at a strong double-digit rate. We have a 37%, 38% share. We have an additional catalyst coming as early as March, and partly here at the Boston AF conference with Dr. Calkins' preview of the new professional society guidelines, elevating the level of clinical evidence supporting the value of AF ablation for paroxysmal AF patients in particular. So -- and we've got the additional landmark clinical trials underway to continue to build the clinical consensus and the payer commitment to support and to fund and to encourage an expansion of AF ablation procedures. The patient demographics here are far larger than for other large established markets with millions of people here in the United States suffering from AF and multiple millions on a total global basis. And with all of this, we've got the leading program. And not only do we have the leading program, but we have a leading program with the best of our pipeline yet to hit the market.

So we are still early in what we can do to support the safety and effectiveness and cost-effectiveness as well as clinical effectiveness of atrial ablation -- of atrial fibrillation ablation procedures as well as some other procedures in the EP cath lab. So we've talked about and we've tracked a little bit. When we bought MediGuide at the end of 2008, we told you it was going to take some time. This has been a huge dilution of current results as we have developed this technology. But it's been worth it to us for all other reasons I've already touched on briefly about the value of the AF space. And so now we -- last year, we told you that we're going to start to put our first MediGuide-enabled cath labs online in Europe, and we did, and we're expanding that now in 2012. And here in 2012, we're in the process of establishing the first MediGuide-enabled cath labs here in the United States. This is not yet an interesting revenue. This is right now still a significant dilution to our short-term results. But this is getting teed up. This is all real. It's getting traction. It takes time. It's disruptive technology. And it is getting teed up to start to become interesting to our results in 2013 and to become more interesting to our results in 2014. So we're going to talk about the impact that our MediGuide technology has for CRT implants. So again, I talked about the synergy of our product portfolio. Here we have the only quadripolar CRT-D system. And what you see coming hand in hand with that is a significant further reduction in radiation with a MediGuide-guided CRT-D implant available. And we've got the first-in-human clinical experience with the impact MediGuide technology can have on CRT-D implants. And we'll continue to develop the clinical data, continue to develop the additional disposable tools that pair with our core MediGuide technology here in 2012 to set up a revenue contribution that will start to become a little more visible in 2013. Besides that, our -- we're putting into the market this year, this is something that we haven't talked to you about before. But you'll see some images today on the new EnSite platform that we'll launch into the market here in 2012, and this is huge. So when I -- see for yourselves, but when I sat to my first presentation of what's the improvement to the image in the new EnSite 1 map that we're going to start to put in the market, it was side-by-side a CT image and our EnSite image. And the presenter said that the better image was our EnSite image and that the less defined image was a CT image. And I thought that was all over the presenter, thinking here we've got a rookie who doesn't know what he is talking about. And I jumped on him about it, no, that's the CT image, and that's the EnSite image, and he was right, and I was wrong. Our reconstructed image gives better definition than a CT image that we'll show you that here later today.

So now I'm almost done. Let me just say a little bit here on the neuromodulation side. So we chose not to -- we chose, if thinking we'll -- we want to make this a shorter program and the Neuromodulation business is the smallest business. The new growth drivers are real. And they, on a long-term program, are meaningful. But on a short term for 2012 and even for 2013, these are less significant growth drivers. So we just won't spend the time on it today.

But DBS, we expect the DBS business to roughly double here in 2012, still on a small end. But we're making -- we're getting traction. Keep in mind it's a very conservative physician group. Slow to change, neurosurgeons and the medically-oriented as compared to a device-oriented neurologist, but we're making good progress. We're setting it up, so that in future times, we'll be talking more about the here and the now with DBS stimulation.

With migraine, we're pioneering migraine. You saw very good data come out of our pivotal trial for migraine. You saw with the worst of the worst in migraine patients, 27 to 28 days headache days a month with a 7-day reduction on days per month of headache, good daily diaries documenting the improvement in their headache experience. This was -- included patients who already had failed botox. So this is -- even with salvage positioning in a salvaged technology for when all else fails, it's still a huge patient population. It's still a wonderful market to invest in developing, and we have a good confidence that this will come to be more widely adopted. But again, it's going to take time with this physician group with neurosurgeons and with headache neurologists to develop the market so -- and get to the FDA process as well. So -- and then a little further out will be the value of our depression technology but again, the Journal of Neurosurgery and the data that was published here, was it last quarter? Was it last month? Last quarter, I see. It shows that although it's more remote, it is real and it is making good progress, and we're fully committed to it and fully investing in it.

So that's my last slide. The -- it's the portfolio, if in past times in presidential elections, somebody would say, is the economy stupid? With St. Jude Medical, you can say, is the portfolio, stupid. And we've got it. We've got -- it's surrounded by everything that one would like to see. So I'll just stop. And with that, I'm going to turn it over to my colleague, Frank Callaghan, to start to get into more substance.

Frank J. Callaghan

Good morning. So as you might recall from last year's meeting, and as Dan has reiterated throughout the past year, we've made significant investments, internal and external, in order to develop a robust pipeline and new growth drivers for our Cardiovascular business. And today, we speak about the Cardiovascular business in terms of 2 broad categories: Vascular and Structural Heart.

So for today's presentation, I'm going to focus on those programs that have key milestones coming up in the year 2012 and 2013, as well as those that will have accelerating revenue impact for our business over the next 1 to 2 years. We also have programs that we're not going to be talking about today. So I do want to point out that the list before you here is not exhaustive.

So starting with the vascular segment. First of all, our pipeline, we feel strongly that it takes advantage of our existing call points in interventional cardiology and radiology. And our focus here, as Dan has pointed out, is to really bring to our physician customers products that are going to improve outcomes and reduce costs. The topics that I'm going to talk about in that vein are here before you, optical coherence tomography, our new imaging platform, fractional flow reserve. And then I'll go into a little more detail on vascular plugs and where we are with what we think is an exciting renal denervation program.

So when we think about PCI optimization, obviously, this comes into diagnostic and interventional coronary procedures. As you look at the numbers of those around the world, there's about 3.6 million procedures per year, and it's not really growing that fast. You'll see the procedure volumes are growing about 2% to 3%, a little bit less in the U.S., a little bit more OUS. But within the general field of PCI, and especially in today's healthcare climate, we believe very strongly that if we bring to market products that are going to improve outcomes and reduce costs, it's going to have a meaningful impact on our business.

And so, when we think about the tools available for a PCI optimization -- I've got them here, there's intravascular ultrasound, FFR and OCT. And then Dan made that comment that today, these technologies, especially FFR and OCT, are very underpenetrated. But even if you look at that low level of penetration, and you look at all the revenue derived from these modalities, you get to an $800 million business today. And so we're going to talk about the programs that we've got in place to help grow that market. So as we think about the market, here, I've spoken out separately between physiology on the left and anatomy on the right. There, you see the procedure volumes. We're showing a 35% penetration, which for each of those categories gets you to separately $1 billion in each. And I do want to point out on the slide that when we talk about the potential for a 35% penetration of the PCIs, this is really based upon the results of the FAME trials going back 2 years. This does not consider the potential impact that we might anticipate from the FAME II trial, which we recently announced we stopped enrollment, and I'll give you an update on that later. And the reason why we think that this penetration could potentially be greater, owing to FAME II, is really because the FAME II population gets to a slightly different patient population, whereas FAME I talks about 2 and 3 vessel disease. FAME II gets us into 1, 2, and 3 vessel disease. And also we're optimistic that with the results from FAME II, we're going to see an escalation in the U.S. in terms of the AHA, ACC guidance with respect to recommendations for FFR. So that's the way we're thinking about the market opportunity today.

So we are the leader, more than 60% share in FFR. We do expect it to become a standard of care and continue to be a significant growth driver for us with a year-over-year growth in the double digits. And already in Europe, it's at the highest level of recommendation to perform during PCI. And as I mentioned here in the last bullet, we are in the process of developing that clinical evidence. We are very optimistic that the FAME II could be the catalyst that will result in escalation from a Class IIa to a Class I designation here in the U.S. And that becomes important because when you think about the Class IIa, the language there is that it's reasonable to perform FFR. When you get to a Class I designation, the guidelines would indicate that it should be performed. And so this is a topic that we're already aware, and many physicians in the medical community are beginning to talk about.

So we still have more analysis to do on our FAME II trial. You heard the -- perhaps you saw the press release in the recent past that the trial was halted. But I'm going to take a step back and go back to 2007 because I think it's very important to understand some of the prior studies and the impact that they've had on PCI.

So back in 2007, the New England Journal published the COURAGE trial. COURAGE was a trial comparing PCI with Optimal Medical Therapy or OMT. And basically what COURAGE showed in 2007 was that PCI really conferred no advantages over Optimal Medical Therapy. And if you go back in time to 2007, you might recall that, that study had a significant negative impact and created a significant headwind for the PCI business. And so, that was important to remember. Then we came out with FAME I and now recently, FAME II. So why is FAME II important? Because what we did in FAME II is we had sought to demonstrate that FFR-guided PCI could be potentially as good as or better than Optimal Medical Therapy. So we sought to demonstrate that PCI can be a favorable -- to help to overcome some of the negative impact that COURAGE had in 2007. We did halt that trial on the recommendation of the Data Safety Monitoring Board and the Steering Committee for the study. They made that recommendation, and we supported that recommendation. And basically, that was based on ethical considerations, largely because the patients that were being randomized to Optimal Medical Therapy were experiencing a significant increase in rehospitalization and a significant increase in urgent revascularization compared to the FFR-guided PCI population. So a great interim result, and that analysis is ongoing. And we expect to present at a major medical meeting and publish, we believe, in a prestigious medical journal the results of the FAME II study here coming up in 2012.

And I do want to make the point also that FAME II is not just a story about FFR-guided PCI. FAME and FAME II, taken together, really have an opportunity to lift up all of the interventional cardiology, not just St. Jude Medical's business, not just their FFR and introducers and guidewires and imaging and other cardiology businesses, but all of interventional cardiology.

So now with respect to OCT. We are the leader. We are the only one with an OCT platform today. We expect this to become a significant growth driver for our business as we go forward. Our year-over-year growth has been robust double digits. And we won't tell you more than that. But more importantly, as we go forward, we are putting into play clinical programs to develop the clinical evidence, much like we did with FAME to tell the story about OCT and the value it can bring to clinical practice and when -- as we do these things, we expect to be able to increase penetration into the imaging segment and gather the data necessary to support favorable reimbursement.

So now I'm going to tell you a little bit about some of the specific programs we've either done or will be doing to help to grow our PCI optimization segment. So first of all, in the second half of 2011, we completed our co-development program with all of the major cath lab manufacturers to provide software for the cath labs that are already in place around the world, so that they can very quickly and very easily accept aortic pressure and PressureWire pressure into them, provide the software where they can now compute FFR and display it on the cath lab system. So here, you see listed 6 of the major manufacturers. There's 5 others, and we partnered with 11 different cath lab manufacturers. And so we completed that program in 2011, so it's going to 2012. We expect that it's going to have an impact on our -- on ease-of-use and then following that, uptake and penetration. So -- and the beauty of this is that, once it's already installed into the cath lab, it's always available. All you need to do is to insert a St. Jude Medical PressureWire Aeris, which is a wireless technology. There's no cabling. There's nothing you have to do. You insert the wire. You establish wireless connectivity. And then you're able to now perform an FFR measurement. So we think this is going to be important to our business going forward.

Last year, we said we're going to launch an integrated platform, FFR and OCT. We did that in the second half of 2011. We called that technology, the ILUMIEN platform. And so this is really the first technology available that provides both FFR and OCT. So it's a turnkey solution, you can do one or both. And what's really interesting about this, and I would direct your attention to the illustration of 3 cath labs, and what we've done with this technology is we've developed wireless connectivity. We can go into every cath lab in the hospital, okay? So this is an opportunity to increase penetration across cath labs in a given institution, put a wireless box in every one of the cath labs. And then we have this concept of mobile integration. You can take a single ILUMIEN system. You can roll it into any cath lab, fire it up in a very short period of time, you've got wireless connectivity to perform FFR measurements. And then if you choose to perform OCT, obviously, you've got that available as well. So this is really just beginning to launch here in the U.S. going into 2012.

So we've got some other programs in PCI optimization. I'm not going to dig into them in great depth here but we'll talk about in general. Well, we've got a brand-new PressureWire coming out. It's all about ease-of-use. It's all about improved handling and lubricity, ability to get that wire into tortuous coronary vessels. We've got a brand-new wireless bedside box, the Xpress Gen 2 coming out in 2012. And then in the second half of 2012, we'll be launching a second ILUMIEN platform, the ILUMIEN II, which is really designed around ease-of-use. It's customer-centric. It's facilitating the workflow. It's about providing improved analysis tools in PCI. And then we'll also be launching our Dragonfly II catheter. Now Dragonfly II, there will be an immediate short-term benefit, but this is also a catheter foundation for the future. So with respect to the immediate benefit, for the first time, this is going to have a dual Radiopaque on it. And at first glance, that might not mean much. But when you put it in one of these catheters and you're trying to position it on the -- right around the lesion of interest, the Radiopaque markers give you an opportunity to position it to ensure that the scan that you perform is precisely over the areas that you want. The other advantage of Dragonfly II is that as we go forward and we evolve our ILUMIEN technology, this will provide for longer pullback, so you'd be able to scan a much larger length of the coronary artery that you can do today and you'll also be able to do it faster.

So also in 2012, I talked about OCT. We're developing the market. It's early in that market development. We've generated a lot of data showing the value of OCT. But as we go into 2012, we're going to be undertaking a program, a seminal clinical trial to develop the evidence required to really make a meaningful impact of OCT in coronary intervention. So this is going to be a trial combining for the first time 2 different modalities, it will be FFR plus OCT in guiding PCI versus in angiographically-guided PCI. And so in this program, we're going to be using FFR to determine which lesions to treat, and then OCT to determine how to treat it. So how do you treat a lesion? You need to know the length of the lesion. You need to know the length of the stent that you're going to pick to deploy. You need to know the diameter of the vessel, so that you can pick the right stent. And so the OCT guidance to help decide how to treat and then once the stent is deployed, then we have the opportunity to look at a lot of things that nobody has been able to look at before. And things that people have always suspected are impactful in PCI, such as, is the stent poorly opposed against the wall? Do you need to go back and re-balloon it in order to improve that position to eliminate thrombus formation? Is there an edge dissection? What are you going to do about that? And so we're combining these technologies in our clinical trial as we go into 2012.

Next, vascular plugs. Dan touched on this. This is an emerging therapy. It's competitive versus coils and surgical clips. I've listed some of the clinical indications where it's currently used today: AV malformations, tumors and yttrium-90 cancer therapy, that got concepts here are all that you can block or redirect flow in order to deliver drugs and other agents to tumors. It's early stage. But for us, it's a fast-growing business, and it's growing in the double digits. And this is a product that's also synergistic with all of our other initiatives to increase our presence and penetration in interventional radiology.

So we've already got 4 of these devices approved in Europe, 2 of them in the U.S. We get especially enthusiastic about the AVP 4, which we expect FDA approval in the first half of this year. And the reason why we get excited about this one is because this is going to open up a new clinical indication for us because this is the device that's really designed to get through very small vessels, very distal in the vascular tree in the treatment of tumors and cancer and also to be deployed to a standard diagnostic catheter, which is something that we're not able to do today with the existing family of devices. So we're looking forward to AVP 4 contributing materially in the coming year.

So now I'm going to give you an update on our renal denervation program, start with a little bit of background. I know that you've all probably heard some of this, but it might be worthwhile just touching on it briefly. It is the #1 risk factor for death worldwide. It's fundamentally the root of much cardiovascular evil. Hypertension is -- significantly increases the risk of a number of different disease states that are listed here. And when you think about your own blood pressure, and you think about -- I don’t know, probably a large number of you have the hypertension -- every 20-millimeter of mercury increase in a systolic blood pressure or 10-millimeter of mercury on a diastole increases the risk of cardiovascular mortality twofold over a 10-year period. Hypertension is a big deal. When you look at the demographics of hypertension, we estimate that there are about 1 billion people worldwide.Hypertension is -- it significantly increases the risk of a number of different disease states that are listed here. And when you think about your own blood pressure and you think about, I don't know -- probably a large number of you have hypertension, every 20-millimeter of mercury increase in systolic blood pressure or 10 millimeters of mercury diastolic, increases the risk of cardio vascular mortality twofold over a 10-year period. Hypertension is a big deal.

When you look at the demographics of hypertension, we estimate that there are about a billion people worldwide that suffer from hypertension. And that number is growing due to the aging demographics. And it breaks out pretty much evenly. U.S. versus worldwide, 1/3 of all adults have hypertension. And so many of these patients, as you're probably aware, they can be controlled. They could be controlled with lifestyle changes, diet and exercise. They could be controlled with various drugs. But this 25%, roughly 25% of everyone with hypertension, cannot be controlled with lifestyle or drugs. And these are the so-called resistant or refractory hypertension patients and those are, really, the patients that we're trying to reach out to with our renal denervation program. And we define resistant hypertension to those patients who are unable to achieve their target blood pressure with at least 3 drugs. One of which is a diuretic.

So here's the way we think about the opportunity. A billion patients worldwide, 25% of those with uncontrolled hypertension. If you assume only a 4% penetration into that population, you very quickly get to a large numbers, $25 billion to $30 billion in opportunity. Quickly, with respect to the background, many of you probably know this, but it all comes down to the pathophysiology of hypertension and the role that the renal sympathetic nerves play in that. Enough that the role that the renal sympathetic's play, which was demonstrated back in the '30s, and this was demonstrated in the surgical procedure. It wasn't renal artery surgery. It was a surgery that got at the sympathetic ganglia that lie lateral to the spinal cord. But it was shown that surgical interruption of these sympathetic nerves intervening kidneys can result in significant reductions in blood pressure.

Unfortunately, the surgical method had high complication rates, hence, fast-forward to the recent years and catheter-based methods have come on scene. You've seen some of the data out there with 1 and 2 renal denervation from a catheter-based method inside the renal artery can indeed impact blood pressure in a very positive way. And then just as a reminder that the safety of this has been around for quite some time when you look at kidney transplant patients. And those patients, the renal nerves are severed quite completely, and those patients do well. So just a little bit of a background.

So now I'm going to tell you a little bit more about our program. And as Dan mentioned, we're going to keep some of the detail close to us. But we're approaching renal denervation as a complete procedure, skin to skin, introducers specialty renal guiding sheaths, a specialty -- a catheter, I'll tell you just a tad more about that in a little bit. Ablation generator, and then in centers that elect to use vascular closure we've, of course, got our Angio-Seal business that can help to seal the arteriotomy at the end of the procedure.

So when we think about our program, it is highly differentiated. We are going to keep some of the details close to us for now. But I think I would try to put it to you this way, and maybe the easiest way to get at it is to talk about the way that it's currently done today. So when you look at other technologies and devices that are out there, you put an ablation electrode -- we'll talk now about RF ablation, you put a single electrode ablation catheter into a renal artery. You try to position it. You're looking at the fluoro, you position it. You put a curve on it. You ablate. So you ablate for a certain amount of time. And it's like, "Okay, now I've got to move it." So then you're diddling with the catheter, you've got to try to rotate it. You want to rotate it enough to make a continuous lesion. You want to be careful about creating a continuous circle of lesions, because if you create a continuous circle, you can end up with the renal artery stenosis, which is undesirable. So when you think about trying to get this done with a single electrode, it's very tedious. It's very subject to mistake catheter positioning and things of that nature.

So we're getting at it in a different way. We're getting at it with a multi-electrode catheter, the details of which we're not going to talk about today. But the concept behind this is to have a multi-electrode catheter, so there is no diddling with electrode placement. The electrodes are precisely positioned in such a way to get -- as to ablate the renal nerves all the way around the artery without creating a situation where you get renal artery stenosis. So I'm going to leave you with that thought and I'm not just going to go into more detail than that. But one of the advantages of this, is you get to a really short and simple procedure. You position the catheter, you verify its position in the renal artery and you push the button and you ablate. And so with respect to the procedure time, with respect to the ability to get this done in a repeatable consistent way from patient to patient, we think that we've got a program here that's going to offer significant advantages.

So we do have -- our clinical program is well underway. We started our first-in-man series in the second part of 2010. We've got about 30 patients done to date. We're very pleased with our results and we're expecting to be able to offer you an update with respect to how these patients are doing. Coming up here in the first part of the year, possibly as early as EuroPCR. So we are moving forward quickly. We like what we've got. We expect to launch this product and entire system in Europe in the second part of 2012.

So now, I'm going to transition to a structural heart business. And I'll just make the comment that we like our structural heart program. We have a product in every structural heart category you can think of. From the surgical front, we've got the full complement and mechanical tissue valves and annuplasty rings. Congenital defects, we've got it all, ASDs, VSDs, PFOs, PDAs, these are all robust businesses for us. And then we talk about, what I'm calling here the emerging transcatheter technologies, which are percutaneous mitral valve repair, left atrial appendage closure and transcatheter aortic valve implantation. I'll give you some detail on some of these programs here as we go forward. But what we like about our structural heart portfolio is it gets to all the core points that we already know and that we already have established: ICE, IR, [ph] EP and cardiac surgery.

So now a little bit about our percutaneous mitral valve repair program. So first of all, when you think about valvular heart disease, mitral regurgitation is the most common form of valve disease. And when you look at subsets of that, mitral valve prolapse is the leading cause of mitral regurgitation. And so when you look at surgical repair of mitral valve disease today, most of those patients have degenerative disease, whereby the reflux elongate or the chords that attach the valve to the ventricular wall elongate or they rupture. And you end up with one of leaflets that flails backward into the left atrium when the ventricle contracts. Mitral valve prolapse is a big deal. It's one of those things -- it can really play a significant role in the development of heart failure. Ultimately, we'll end up with dilatation of the left atrium and the left ventricle and could lead to pulmonary congestion and heart failure. So it is a significant public health problem.

When we look at the opportunity for mitral valve repair and what we've done here, is to look at organic MR carved out those patients that have classic mitral valve prolapse. And if we only assume 5% penetration into that population, we get to a $2 billion-market opportunity. So I'm going to now tell you a little bit about our program. And similar to prior topics, I'm not going to tell you everything about it. But I will tell you that our program is based upon a time-tested method of open-heart surgical repair. It's been around since late 1950s and early 1960s, originally developed by Dr. Dwight McGoon at the Mayo Clinic. And what Dr. McGoon was able to demonstrate was that if you have a prolapsed mitral valve, in this case you're looking at a posterior chordal rupture, and if you can position sutures in such a way you can essentially fold, the process is known as plication, you can fold the valve into the left ventricle. And if you can somehow keep that fold and fix it like you see in the right-hand illustration, you can eliminate all the excess leaflet and you can prohibit or help to prevent that valve from flailing backwards into the left atrium. That is fundamentally the method that we're employing with our PMVR program. I'm not going to tell you exactly how we're doing that, but that is the method.

So at this meeting last year, I told you that we were going to undertake the first-in-man series. In 2011, we started that series, that series is in progress. We're doing it first from a transapical approach and then we're going to follow that up with a transseptal approach. Now with respect to our first-in-man series, the transapical approach that I just mentioned, we're really getting at this in a very unique way. We're being very painstaking to make sure that we get this right. And so our first-in-man series is being done, really, on an acute basis. So we're going in transapically in patients that are going to have other open-heart surgery for some other reason. And so we're going to position the device and deploying the device so that at the time of the following surgery, we're able to look at it. We can touch it, feel it, smell it, and make sure that we've got it just right before we could move to the next phase of the program, which was to make the repair permanent.

So in the first half of this year, we're going to complete that first-in-man series. In the second part of 2012, we expect to begin our CE mark trial. I've given you some of the points about that trial here that I won't read to you. But we expect to have our trial completed and we're estimating a CE mark for this technology, it'll first be for the transapical method. We expect to get that in the second half of 2013. And then also in the second part of 2012, we're going to be starting our patients series with a transseptal approach. Now transseptal approach, we think is where you want to get, in order to get the greatest penetration into the opportunity. So the beauty of the transseptal approach is that you can go into through a femoral vein, cross the interatrial septum and come down and repair the valve from that position. So we'll be starting that series in the second part of 2012.

Left atrial appendage closure, I think you all know this is fundamentally a story about AF patients and minimizing the risk in them. It's basically the atria quiver, you get blood stasis that occurs in the left atrial appendage. And if that blood is pooled and not moving, it could form a clot, which can then be shed causing a stroke. You already know some of the background on stroke, it's the leading cause of adult disability in the U.S. and Europe.

So the major role and what we're going after with the left atrial appendage closure is to mitigate that risk in stroke. And so when you look at standard of care today, it's warfarin. And I'll make a couple of comments about warfarin and move on. It's a hard, hard drug to manage. It's a dangerous drug. It's really subject to lifestyle choices. It's subject to genetics and, quite frankly, it's not tolerated at all in about 40% of the patients. And of those 60% that can tolerate warfarin, it's very difficult to maintain the right blood levels. And if you go too high, you're going to suffer from hemorrhagic stroke. And if you go too low, you're going to suffer from an ischemic stroke. So warfarin is not a great drug.

We often get asked about, "What about all the other new agents out there?" There's dabigatran, rivaroxaban, apixaban in various stages of clinical testing. And I think I would make just a couple of simple comments about that. While they might, in some cases show some improvement over warfarin, stroke and systemic embolization still occur, and bleeding still occurs. And all these, all the difficulties of managing a patient on warfarin are still there plus the cost is greater. So we think that a transcatheter opportunity to help to minimize stroke in these patients is an important alternative.

Here's our thoughts about the market opportunity. We start patients with AF. If you carve out the patients that has paroxysmal AF and only focus on those with persistent or long-standing persistent, we get to roughly 3/4 of that population. And then if you only focus on those that are high risk of stroke, and by high risk we mean that they will have other co-morbidities such as congestive heart failure, hypertension, they'll have diabetes mellitus, they'll have a history of a prior stroke. So when you look at the high-risk population there, and then take 5% of that, which we think is pretty conservative, you get to an opportunity that's $1 billion.

So a little bit about our AMPLATZER Cardiac Plug. This is deployed into the left atrial appendage. We think it is very differentiated over the other technology that's available in the following ways: It's very easy to deploy. It's repositionable. What we like about it is, when you look at the left-hand side of that illustration, you'll see a fabric-filled woven disc, which is intended to fit right on top of ostium of the left atrial appendage, and so what happens is you position the device, you get endothelization of that proximal disc. And then the entire appendage is closed off. Unlike other devices, which can be positioned too deeply and still leave packets behind where blood can form. And so the concept here is that if you can get complete endothelization, you'll have a patient that can have a lifetime free of anticoagulants. It takes advantage of our existing core points in EP and interventional cardiology. It's synergistic with our AF business. It's fully available in Europe. And as Dan mentioned, the United Kingdom's National Institute for Clinical Excellence has elevated that in its guidance supporting its comparative effectiveness in AF patients.

So with respect to the status of this, as I mentioned, it's available in Europe. We did complete our feasibility phase of arriving a trial here in the U.S. A small number of patients, per protocol, 45 randomized, 2:1 to warfarin. These patients actually became part of the pivotal phase, we're just simply at the point where we're waiting for regulatory approval here in the U.S. to continue that program. We expect to get that and we expect to move forward with this program in the U.S. here in the first part of 2012. And if you fast-forward from that, assuming data that support it and we're optimistic in this device in that regard, we're looking at PMA approval sometime in 2014.

PFO closure for stroke, the relationship between a PFO and stroke has long been suspected, never definitively proven. A former competitor tried to get at this with a device in a clinical trial. The concept here is that there's a whole bunch of sources of venous thrombus. So either in the venous vasculature or in the right heart, and when these clots break loose, normally they'll travel to the lungs. If the patient has a PFO, they can cross that PFO and go to the brain and cause a stroke. And so a device-based closure is intended to mitigate stroke by closing the hole. We think we've got a credible shot on goal to be successful here. And just to mention that, first of all, even though a former competitor failed in this regard, we've got a different device. The AMPLATZER device has better procedural success, better technical success and that it better closes the defect with no residual shunt, less thrombus and less periprocedural AF in different trial designs.

So as you know, we announced that we stopped enrolling in this trial. We stopped enrolling because we met the number of stroke events that needed to occur before the trials would be held. So that's done. We're in the process, in conjunction with the Steering Committee for the study. The data is being analyzed. We expect to be able to tell you about that in a major medical meeting here in 2012, assuming favorable outcome with PMA approval at the end of 2012 or early 2013. Here is the opportunity as we see it, almost a $2 billion opportunity. In the interest of time here, I'm going to move a little faster.

We have a similar program in migraine. Same story. The relationship between PFO and migraine has always been suspected but not proven. Again, that same former competitor tried and failed. We have a program in place. We think we can succeed because of device differences and because of protocol design differences and because of patient selection differences. This program is well on its way. We've completed enrollment of more than 200 patients against the required number of 230. So we expect to actually stop enrolling in this trial in the first part of 2012. Then we're going to follow these patients for a year or so. Even though we'll be stopping enrollment, we won't be able to tell you much about the data until we get a year further out. And here is the opportunity as we see it, another potential billion-dollar market opportunity.

Dan talked about trifecta, a $500 million market. We're just getting into -- we love what we got. We love the growth that we're getting out of this product. The hemodynamics are simply amazing. The employability is strong. And I think the numbers that we've talked about, and our competitors have spoken about in terms of surgical heart valve business, tells a story and not much more needs to be said.

So now we're going to wrap up with our transcatheter valve program, and I'm going to only talk about it a little bit. And then we have a guest speaker who's going to tell you much more about the personal clinical experiences with our product called Portico. Being a -- in the past hour, we have an advantage of seeing all the limitations and shortcomings that everyone before us had suffered from. And so while we are behind them, we believe very strongly, that when we come into the marketplace with this device it will truly be a second-generation with significant clinical value compared to competitor devices. We are working on -- some of the elements of our program are shown here. We are talking about 4 different valve sizes, 23 all the way to the 29 valve size, which pretty much gets to the entire population. With respect to the delivery systems, we've got transapical, we've got transfemoral. And we will also get into the market with versions of the delivery system that will let us approach the valve implantation from either a subclavian access or from a mini-surgical procedure with a transaortic placement into the annulus.

Again, this is a skin-to-skin procedure for us. We've got large bore introducers that are about to enter our clinicals in conjunction with Portico. We have in development -- I'm not going to talk more about this today, we've got a large bore suture-mediated closure device, which is part of our program. You might recall that vascular complications have been one of the limitation to date. And we think we've got a solution for that with our closure device. And then, there's stroke and there's been a lot of discussion about stroke. What stroke means, how these patients fare compared to surgical patients in that regard. And we also have an embolic protection device, I'll just mention that and move on.

The only other comments I'll make is some of the attributes we designed to get that, we want it to be retrievable, repositionable and the reason for doing this is because, simply put, if you can put it in the right spot, you're going to get less heart block, you're going to get less paravalvular leak and you're going to get the best in optimal valve performance. And we've also designed this in such a way that we expect it to be a short delivery time and very easy to load in the cath lab]. And very -- shortly, I'm going to introduce to you our guest speaker, Dr. Ganesh Manoharan. You know the opportunity. We see a $2 billion opportunity for TAVI, and now I'm just going to leave you with some thoughts about our 2012 milestone.

So first of all, I should mention that in 2011, we did start our CE mark trial for our transfemoral delivery of our 23-millimeter valve. That trial started in December and that is ongoing right now. We expect to get the CE mark on that in the second part of this year. Okay, that's the second bullet, where we will launch the 23-millimeter transfemoral into Europe. In the first part of this year, we'll start our transapical program and with the launch of our 23-millimeter transapical at the end of this year, possibly early in 2013 and then we'll also be starting our -- for our 25-millimeter transapical and transfemoral products, our CE trial in the second part of this year.

For your convenience and the interest of time, I'm going to move on. These last 2 slides are a recap of the significant event that are taking place for our cardiovascular business in 2012 across all fronts, that is for your reference. And then I'll just complete my talk here with a summary of some of the opportunities that I just spoke about. $27 billion opportunity in the Vascular segment. Almost $9 billion of opportunity in the Structural Heart segment. We think we've got a great program. We think we're well on our way to delivering these things that we think are very differentiated or very disruptive or new. And so, I'll just stop at that.

So now, it is my pleasure to introduce Dr. Ganesh Manoharan. He is the consulting cardiologist at the heart center, the Royal Victoria Hospital in Belfast, Northern Ireland. And an honorary senior lecturer at the Queen's University at Belfast. He is a very experienced interventional cardiologist. Across-the-board, some of you may not be aware this, but he's also been an investigator on our FAME and FAME II trials. He is also one of the leading implanters in Europe. He is personally either implanted or supervised the implantation of over 1,000 transcatheter aortic valves either through his roles as physician or as a proctor for the Medtronic CoreValve program. Dr. Manoharan has served as one of our investigators in our first, first-in-man series. And now he is currently serving as our lead investigator for our CE mark trials that are taking place in Europe now. So we are very pleased to have him here. He's a very busy guy, but I appreciate Dr. Manoharan joining us today.

Ganesh Manoharan

Good morning. Thank you, Frank. What I hope to do today is to give you an overview of the clinical programs with the St. Jude Medical Portico system. And I will try to, between slides, try to show you some differences of what the currently 2 available technologies differ in relation to this technology.

So as Frank has already shown you some aspects of the Portico device, it is an 18F nitinol self-expanding technology. It's made out of -- it's designed to be fully re-sheatable while still attached to the delivery catheter. And while it's still attached to the delivery catheter, it's fully repositionable and retrievable. It's unique in its design and that the device has both porcine function and bovine parts of the valve. So the functioning part of the valve is made out of bovine tissue, and the skirt part of the valve over here is made out of porcine pericardium. At the moment the size 23 enables us to treat patients between annulus 19 to 21. And also, the certain unique features of its cuff that allows us to better adhere to the anatomy. That I'll come to in the next few slides. Importantly, it is designed to be implanted transfemorally without the need for rapid pacing.

So here is a -- I'm going to start by a showing you case give example. I'm going to orientate those of you who are not -- haven't seen this very often. So this is a patient who was a part of the first-in-human study. Clearly, external clips, previous CABG, this is the aorta, the ascending aorta of the arch, and the ascending aorta. Here's the root of the aorta itself. Here's the left coronary artery and here's the Portico valve, at the moment almost 80% fully released and still attached to the delivery catheter as you can see coming up here.

One of the key advantages of self-expanding technology is that you can, at this point, while it's still attached, 80% of the valve itself, the new valve is fully functioning. You can take your time assessing to see where the valve -- here's something a balloon expandable can never do. And a balloon expandable technology, you have one shot at it and you can only assess your product, your finished product once the valve is fully released. One the advantages of a self-expanding technology is that you do have time now to see exactly what this valve will look like when it's fully released. Now in this case, we filed -- so the aim -- those of you who played Nintendo DS and Wii, will understand what I'm just trying to say, the aim of the game is to release the technology just below this little valve you see there, the curve. So you want the valve edges, which is the bottom part of the valve here to sit just below this line. So this arch of the line you want it sitting somewhere there.

We were a bit concern that this valve is probably a little too high. Now this was the other clinical device, which is an electronic cobalt device today, the only way you're going to fix this now is to drag this valve all the way out of the patient's body. In doing so, you do increase the risk of annular rupture, stroke, defections or tear in the aortic arch or ascending aorta, also the femoral artery. What we can do with the Portico system is now to fully resheath the device, and this is demonstrated in this slide or AVI now. So this is the sleeve of the valve coming slowly down and one of the other advantage of this is that you do not need to fully resheath the device to see where you are. You can partially resheath it, check it to see where you are. And I think that you can also see is that by resheathing, you're not significantly altering the already fairly good position you've obtained.

You have complete control on where the valve is in relation to the patient. You have always control in what the valve is doing. So we check and see at that point if other valve is now in a much better position, and we then have to release the valve in this patient quite safely. So one of the key advantages of this valve and this technology that you can gradually, consistently, safely, resheath the valve and check the position to make sure you have optimum position to fully deploy the valve.

So the aim of this valve is designed to be annular in position. So unlike an electronic cobalt, this is an annular valve, ideally positioned to be between 3 to 6 millimeters. In other words, you have a very, very high level of the anatomical annulus. The important feature then is that you are well away from the left bundle function of the patient, which has been now -- been cause or one of the main causes for the need for pacemakers in patients for [indiscernible] valve technology. If you're away from the left bundle and far away from the left bundle, you're less likely to introduce rhythm issues with patient. So one of the advantage of this technology, or foreseen advantage is that by deploying it very high, you're away from the left bundle, therefore you're not interrupting the conduction system in the patient. And clearly, you are also away from another important organ of the heart, which is the mitral valve.

So the design is such that most of the valves fit in the ascending aorta and a small portion of the valve, the fixating part of the valve sits just below the in the annulus segment. Another unique feature of this valve technology is that it's built on a much bigger cell. So by allowing that tissue to a metal in touch with a -- much higher tissue to metal ratio, and thereby increasing the contact of tissue to the patient's tissue, thereby reducing the metal force on the left bundle if you are a little too low. But I think, what's important is, while it will potentially encourage more endothelization and also reduce the risk of potential parallel [ph] leaks after implantation. And other important feature as well, because this is an annular valve access to coronary artery is almost a given token. And I'll show you in the next few example of what that means.

So the procedure -- this first-in-human study was conducted in Belfast. And this just a protocol. We have a very strict protocol on who can be part of the TAVI program. We used our clinical protocol to select patients for this trial. So all patients who went to our clinical MDD process were part of the protocol. We needed 2 surgeons to say that these patients are suited for TAVI. They all must agree that TAVI is an acceptable option for these patients. We then see the patients about a few weeks later to discuss the options and then plan for the procedure. And the patients are going to consent us both for the procedure and for the trial.

These are some key inclusion and exclusion criteria for the study. They are not different from all the other trials that are already out there both the panel trial and the cobalt trial and all other first-in-human, essentially must have -- they must be elderly, they must have significant aortic stenosis. And some key exclusion criterias are mainly related to the longevity of the patients able to live for more than a year and technical issues relating to the TAVI procedure itself.

So the objective of the trial were twofold. One is to evaluate the technical feasibility, device deployment characteristics and overall safety profile for the 23-millimeter Portico system and delivery system. And also then to use the data that we have collected to prepare a base of clinical experience and safety performance in order to support the next set of trials to a CE mark in Europe.

For milestones that both Dan and Frank have already touched, the first Canadian implants were performed by Dr. John Webb in June last year. We are part of the first-in-human study in Belfast in August 2011, and completed the trial in 6 weeks. So 10 patients enrolled by September 2011 and the data was presented at TCT. The European CE mark study will then started in December past, based on the results of the first-in-human. So I'm going to now show you the results of the first-in-human. This is, again, just to show a way beyond the numbers. The Canadian experience so far on the special access, they've done about 10 patients so far. We did 10 patients as part of the first-in-human study. And so far, they've implanted 4 patients -- into 4 patients as part of the CE mark trial. So a total of 24 patients thus far.

So some of the results of the first-in-human 10-patient trial. They were exclusively females, partly because of the stature of the patients. The 23-millimeter valve is due for 19-to 21-millimeter annulus. They tend to be females with smaller stature and size. Elderly patients, a fairly high-risk category and having significant severe aortic stenosis. All intended to have [indiscernible] put them on a more higher risk of fail. Again, similar to what you'd find from the already published component trial, all the other registries. But importantly, they also had other comorbidities that deem them appropriate for TAVI or puts them in a category that they not suitable for surgical aortic valve replacement.

So these are the general studies we did for all our patients. They were all performed percutaneously and under local anesthesia. These patients were fully conscious and awake during the procedure. They've used a percutaneous method of closing the large [indiscernible] excess using a [indiscernible] system. The St. Jude 18F introducer sheath was used to deliver the valve. We used a super steep wire to deliver the valve across the native valve. And the human nucleus, the 18-millimeter balloon was used to pre-dilate all of these native valve to create a space to deploy the Portico system.

So some general numbers to think about. The time of procedure really was very acceptable. The fastest we did is about 30 minutes, 39 minutes. And the longest was about 70 minutes. A very quick delivery time. Acceptable exposure of fluoro. But importantly, we did not need a second valve in any of our cases. And in 2 patients, we needed to resheath the valve to obtain optimum positioning.

So in terms of clinical events at 30 days and a 3-month, we had no death. We had no stroke, clinical stroke, we have no need for new pacemaker implantation. There were 2 new left bundled perceived, 2 was doing [indiscernible] of the valve and one doing resheathing and one patient has a forced valve. There were no patients who were aortic regurgitation over mild, a great mild. There were no vascular complications. And there were no myocardial infraction. I can think of no other first-in-human trial that has shown these kind of results. And I think that is a testament to the technology both on the R&D front and to the clinical team at St. Jude but also to the due diligence that the company does in selecting where to perform some of these trials. So congratulations St. Jude to coming to my unit to do this trial.

[indiscernible] 5, most of them went to about 3 days. And again, that's another feature of this technology because the left bundle issue is not a big issue, pacemaker issue, was not big, we were able to discuss a lot quicker than the currently available clinical devices.

[indiscernible] similar to what we found in other valve, significant improvement in mean gradient and improvement in aorta valve areas. And importantly, I think with this technology we found, the valve [indiscernible] on baseline before the valve went in quite a few base and still had a baseline evidence of aortic regurgitation. But importantly, after the valve went in at 30 days. No patient had anything more than mild, which is extremely encouraging and reassuring.

And there was significant improvement both in [indiscernible] class and [indiscernible] Seen at 30 days already. All our patients went home, directly home to where they came from. They did not go to step down units or anything like that, so they were mobilizing the following day, and well and fit enough to go home, which is again quite a feature for these kind of patients. We had 2 series of adverse events reported. And both of them, one was the hypothyroidism and the other had a [indiscernible] use. And we felt that these were not due to device-related procedure or procedure-related to AF.

I'm just going to now talk about an example of a patient, which is quite interesting that I think also demonstrates one of the feature of this valve. So this was a 90-year old patient, who had quite a severe symptomatic aortic stenosis. We grade the severity, you can see the valve, this is the native valve, this is the left ventricle, this is the aorta over here. And normally, you should see this opening and closing, this is almost a fused, a straight calcified [ph] line. We assess grading by the velocity across the valve. And normally, we'll get a grade of about 400 and 410. In this case, it's severely raise to 533. So this patient has severe symptomatic aortic stenosis. The procedure was done using routine method. So we do normally [indiscernible] to make sure that 3 stenosis are in one straight line. So that's the line we are aiming for. So what you want is the valve to be just below this line. We do an angiogram and puncture the artery on the fluoroscopy to make sure the femoral artery is right -- in the puncture are done right in the middle. And then the valve is then advanced for the descending aorta, here's the Portico system going up across the arch. Seamlessly and reproduce-ably in all our patients, so far, which is quite encouraging, crossing the valve here with the native now being crossed.

So that's the line we're looking for. That's the pigtail sitting at the sinus. And the valve then is slowly released and deployed. Now up to the deployment, positioning was excellent. But we had quite a significant or moderate part of our leak by showing the angiogram coming into the left ventricle. We found that this is due to calcification of the anatomy. The haemodynamics were not good enough the discharge this 90-year old patient. She had normal gradient [ph] but clearly had quite a lot of regurgitation flow. So we decided to go ahead and put that into the valve. And this was done with ballooning. Post dilatation, the regurgitation significantly improved. But importantly, her haemodynamics improved. We made a conscious decision at that point now to stop. She's 90-years old, we had no more gradient. We thought that this patient should do okay. And this is the key for us, so you do not need to know the echocardiogram to see what I'm trying to show.

But essentially, there's an echocardiogram showing the valve here. This is the left ventricle here. Now if you look at color flows here blue and red, any flow towards the probe, which is sitting up here will be in red. So the valve is here and you can see this clear jet of orange and red showing part of our leak. So at discharge, this patient had what we categorized as moderate parallel [ph] leak, which is clearly identified. She went home and at 30 days, we took really multiple views and again we put it in the same, you magnify it and they can see that jets that was there before has now fully disappeared. There are still some minor jets here probably about trivial, but the big dominant jet of parallel contrast leak that you can see there, which is blood flow back in the left ventricle is not there anymore. Importantly, our 6-minute walk test, a baseline 80 meters and at 30 days, she managed to almost double that. I think this is one of the features of this valve that it does encourage and utilization and see lost areas that are potentially leaking during deployment and post-deployment.

So to conclude then, I think these early encouraging signs results suggest that TAVI with the Portico system is both feasible and safe. We do not see any adverse clinical events during the study days and at 3-month follow-up. And I think the novel re-sheathable feature of this device allows with accurate and consistent positioning of the valve allowing good results. The results of first-in-human and allowed us to submit for the Medical Device agency approval and CE mark and for the ethics approval to start a CE mark trial. The trial is going on very well. We hope to implant in centers in U.K. and Germany for the next weeks and months. And hopefully, we'll be able to submit our 30-day results, hopefully, aiming for PCR and if not that, then with the PCT [ph]. Thank you.

Question-and-Answer Session

Daniel J. Starks

Okay. So this will be our first panel session and we've got a number of others from St. Jude Medical coming up to join Dr. Manoharan and me, as members of the panel. If you would bear with us please -- and I know a number of you want to talk about atrial fibrillation and want to talk about the Pacer and ICD business. If you can make yourself wait until our next panel, it will make it a more efficient discussion because we're going to volunteer a lot of organized data and we have 2 additional guest speakers. And so we can -- I'm sure, we'll answer a lot of your questions during those presentations and we will have a panel that is organized specifically to provide robust answers to your additional questions. So we put cardiovascular first with the idea that this is the part of our business where you're going to see the most change in 2012. And also some of the panelist -- for those who are not in the room, Mike Rousseau, our Group President; John Heinmiller, our Executive Vice President and Chief Financial Officer; Frank Callaghan, President of our Cardiovascular division; Dr. Monaharan and Rohan Hoare, President of our Neuromodulation division. And with that, we've got microphones -- come right up your first. And please speak into the microphone for benefit of people who are participating by Internet.

Michael N. Weinstein - JP Morgan Chase & Co, Research Division

Mike Weinstein, JPMorgan. We haven't seen in the transcatheter valve market a leapfrogging of technology like we saw at different points in coronary stents and drug-alluding stents. So I'd be interested is your perspective on -- if St. Jude comes out with their device in 2013 and you spoke to the advantages of it, retrievability, repositionability, doesn't stick in the left ventricular track [ph] like the device does and so forth. So what are the reasons why the market wouldn't switch from one self-expanding device to this device other than they will be limited in their sizes? And initially, why wouldn't physicians switch to what appear to be a better device?

Ganesh Manoharan

Why wouldn't they switch. I mean there's a lot of things that people do that you just can't explain. I guess it will depend on results. I think the results are so far very encouraging. I think it will depend on the marketing of the technology. You need to be able to market the results to the right people. And then finally, will come to how the device itself is marketed and implemented in other centers. So that comes to training, development, proctoring. And all of that I think will send the right message for people to use the device. In terms of using in a TAVI, we had 2 patients to learn from. And after the second patient, every other implant has been consistently reproduceably perfect implant, which I cannot probably say about the other technology. One of, I think, the key advantage of this is that once you are 80% released, you are able to fully reposition. So you have no excuse not to get the position right.

Michael N. Weinstein - JP Morgan Chase & Co, Research Division

Frank, if I can just follow-up with you. Could you just talk about what you're doing to put the resources in place ahead of Portico's launch as well at the renal denervation launch? And in the renal denervation marketplace, you're going to -- the market is still so early in its development. It's part of doing a lot of heavy lifting right now and trying to get reimbursement in place. But your going to try to advance the technology, obviously, to make it a quicker, simpler procedure. How do you think the market plays out longer term on a competitive landscape? What defines who ends up leading this market versus one company, versus another?

Frank J. Callaghan

Well, I think I will make the comment that in order to develop the market, as you know, there's a lot of facets to go to, it's about reimbursement, it's about establishing the referrals. It's about making everyone aware that this is a compelling new way to help treat hypertension. So all of those things I think are normal and are foremost in our thinking. With respect to the competitive advantages and disadvantages, I think ultimately, as is the case with many technologies, it comes down to ease-of-use and the quality of the clinical outcome. And I think with respect to ease-of-use, what we've got in the pipeline that's in clinical right now is compelling from an ease-of-use perspective and the robustness and the repeatability of it. I think those are going to the big differentiators. And that's one of the reasons why we get enthusiastic about our program.

Daniel J. Starks

Maybe let's kind of alternate side of the room, side of the room.

Brooks E. West - Piper Jaffray Companies, Research Division

Brooks West, Piper Jaffray. Dan, I wanted to start with a question for you going back to your comments on pipeline. You did have CardioMEMS slip, you mentioned that PFO closure has stepped up, obviously, there is some risk there as well. The question is, do you feel the need to replace CardioMEMS perhaps with an acquisition, you're anniversary-ing the AGA acquisition. Do you feel like the pipeline as it stands is good enough to maybe replace that opportunity? And then I just wanted to get your perspective on business development in general right now.

Daniel J. Starks

The last part, get my perspective on what in general?

Brooks E. West - Piper Jaffray Companies, Research Division

Business, development in general. Acquisition...

Daniel J. Starks

Okay. Yes, sure. No, we do think we need to replace CardioMEMS with an acquisition. And yes, we do think that our current pipeline is full, robust and adequate and with an opportunity, not only to meet our goal of returning to high-single digit, low-double digit growth but also that it gives us a credible opportunity to over achieve our goal. With respect to business development, generally, we have additional internal development programs that are underfunded or that are not yet funded that are included in how we think about business development. So we have a complete robust pipeline of technology that is fully funded, number one. Number two, we have additional technology that is within our portfolio that is available for additional funding if it becomes an appropriate priority for us to allocate funds to it. And then number three, we remain active, reviewing emerging technologies outside the St. Jude Medical portfolio that would be available for us to bring into our portfolio through acquisition. We have the luxury then of being very disciplined with M&A with business development. We don't have to do any transaction. We have -- we keep our balance sheet in condition so that if we find the right opportunity on the right terms, and when we think about right opportunity then we have a lot of screening criteria to go through to qualify an opportunity as the right one. It needs to offer good synergy with our current program. It needs to offer some value added, at the same time they offer some good synergy with our current program. So it has to be something a little bit different, but also something a little bit the same. And it has to compete favorably with our internal development programs for funding. Because anytime we make an acquisition, we make it with the idea that, thereafter, we're going to add significant additional resources to it on all fronts to advance that and capture the next-generation of the next-generation of that technology. So if an external technology or external business passes through all those screens and is available on the right terms to us, then we would go after it to further accelerate our growth profile. But it's very hard to find those opportunities.

Brooks E. West - Piper Jaffray Companies, Research Division

Could I follow-up with one for Frank?

Daniel J. Starks

Sure. Yes.

Brooks E. West - Piper Jaffray Companies, Research Division

With regard to the RESPECT trial, I imagine one of the things you're doing since the trial was maybe going back reengaging with FDA just on the interpretation of the data. I'm wondering if you could just frame the landscape, obviously, sensitive to discussions with FDA. But frame the landscape from when RESPECT was started, maybe the influence of the NMT closure trial and kind of the current high-level discussions or thoughts with FDA around that approval?

Frank J. Callaghan

Just a brief history. The RESPECT trial started, actually been ongoing for quite some time. I think it started around 2003, 2004. So it's been ongoing for quite some time. We actually -- and a lot of people wondered with the failure of the CLOSURE I trial sponsored by NMT was enough if we saw any material impact on our enrollment. The answer is no, we did not. I think our investigators felt that we had a strong shot at completing enrollment because of the differences in device performance as I mentioned briefly. So I'm sorry.

Daniel J. Starks

Let me get at it a little bit, Frank. Let me just kind of -- I want to help you out partly by way of what we don't want to talk about. And then also, I can help you out a little bit by way of some public facts that people can look to. Remember that there is -- well, first of all, we're on the market in Europe with a stroke indication for PFO closure. And with implants and with an increasing amount of implants being done, number 1. Number 2, remember they, again, just for tone and background, remember that PFO closures for patients at particularly high risk of stroke were being done in the United States under a humanitarian device exemptions here. And so there is a cadre of clinicians and a cadre of clinical experience that is favorable to PFO closure for the right patients. And so I think about this trial as really being an evaluation of further defining who are those right patients. So that would give you some color and some tone to the background of the regulatory discussions. But rather than say more about that directly, once the data are published, the conversation will become much less obscure. So let's get the data presented at a major meeting and then we'll talk about -- okay, now what are the regulatory implications of those data. I think it will really be a clean discussion. Yes, go ahead. Let's see, just pick somebody here and you say David, right there. Right to that gentleman right there.

David R. Lewis - Morgan Stanley, Research Division

It's David Lewis, Morgan Stanley. Frank, just to come back to you on left atrial appendage. Obviously, you've talked about the opportunity and you proactively addressed next-generation anti-coagulation and why you're still bullish on that market opportunity. I guess one of the goals of the left atrial appendage is to remove patients from Coumadin warfarin in the long-term. And if we look at the progress of the next-generation drugs, just in the last 15 months, it sort of have been less dramatically successful than people thought. So I guess it appears as if the Coumadin, warfarin issue has not been as taxing on patients if you look at this next-generation therapy. So just help us understand why you are so bullish on that opportunity for that left atrial appendage given what the next-generation therapy have shown so far?

Frank J. Callaghan

Well, I guess I would make the comment that the next-generation therapies, dabigatran, rivaroxaban has been the direct thrombin inhibitors. First of all, the data are early. There's been new clinical discussion about incidences of complications with these agents that weren't originally revealed in the clinical trials that brought them to market.

First of all, the data are early. There's been new clinical discussion about incidences of complications with these agents that weren't originally revealed in the clinical trials that brought them to market. And so I think for those reasons, we remain bullish. There still is somewhat a cloud of suspicion hanging over some of these agents. Are they going to prove to be better than warfarin? Maybe they will. Maybe they will have certain advantages over warfarin. But still for the reasons I pointed out, especially in younger patients with AF, to be on a lifetime of medication where you still have bleeding complications and you still have stroke complications, I think there still is an important story there and an important opportunity for LAA closure.

David R. Lewis - Morgan Stanley, Research Division

And just maybe just another quick one for you. I know we're not going to get much out of you on sort of the FDA processes. Staying away from that as sort of respect, you talked about the prior failure of NMT and talked about the design improvements and clinical trial protocol improvements that will give you a sense that you'll be successful here. Obviously, as we saw with CardioMEMS in chronicle, there were clinical trial improvements that actually allowed you to deliver a superior result. Obviously, it didn't go the way you'd liked. But in this particular case, what are the device and protocol changes that you think improved your odds of success relative to NMT?

Frank J. Callaghan

With respect to protocol changes, I think probably some of the -- one of the most important ones was that, first of all, TIAs were excluded as an inclusion criteria for the implants or device and the RESPECT trial. We and many others think that TIAs kind of clouded the data for NMT. So that would be one protocol topic I'd mention. The other is that the CLOSURE I trial, we believe, was sorely underpowered to really make any determination about the benefit of PFO closure. Since the medical trial, the RESPECT trial was a totally different trial design, okay? It was basing in adaptive design that was structured in such a way that if you got into certain number of stroke events in the trial, it would -- there would be enough power to make a decision as to whether or not the device closure had any meaningful impact on the instance of stroke. And so just the whole statistical design of the study was vastly different from what NMT undertook. And so those would be the trial points I would make. And then with respect to device closure, there is ample evidence in the literature that simply put the AMPLATZER device is a better device in terms of technical success. And by that, we mean the rate at which you can close the hole and not have any residual jets, okay? So that's technical success, better with the AMPLATZER device than with the NMT device. When you look at thrombus formation, there's lots of evidence in the literature that the NMT device was more prone to develop thrombus, which, in and of itself, can shed and cause a stroke. And so that clouds the picture. And then in terms of peri-procedural complications, the incidence of post-procedural AF in the NMT device was greater. So there's trial differences. There's structure differences. There's patient inclusion criteria differences, statistical differences and device differences. And I think when you put those all together, we're going to be optimistic about the outcome. At the end of the day, the data will be the data. And we'll be talking about the data later, but those are my thoughts on that.

Daniel J. Starks

Let's come back over here somewhere. All right.

Joanne K. Wuensch - BMO Capital Markets U.S.

Joanne Wuensch from BMO Capital Markets. I've sat at this meeting for many years, and every time you start off with the ICD business, notably you're starting off with cardiovascular this time. Do you see in 4 years a meaningful shift in the percentage of your revenue that comes from each business?

Daniel J. Starks


Joanne K. Wuensch - BMO Capital Markets U.S.

Would you like to get more specific than that over the next 3 to 5 years? And let me ask you a different way. Do we think of the CRM business, which is about 50% of your revenues now, as in harvest mode as you start to invest in more of these types of product line?

Daniel J. Starks

I won't answer you directly, Joanne, but I will say something. So remember that the -- it wasn't so long ago that our Pacer and ICD business was 66% of revenue, and now we're down to 52% of revenue. So -- and I believe that this -- and this is not so different from where we were 10 years before that when we were about, as I recall, 66% mechanical heart valve business with ICD 7% of our total mix. And now look at that transformation. So I mean, I think you've seen cycles of growth as originally it was a mechanical heart valve business, and it used to be a pacemaker business on the Pacesetter-Siemens side of what is now St. Jude Medical. And you saw the transformation from a valve organization to as heavily focused on CRM as we became. And now what you're seeing is another transformation from a growth program that has been so heavily focused on CRM to a growth program that is -- that will be focused on new growth drivers. So there had been cycles of such transformations in our corporate history, and we are in the middle of another cycle. And this is not a surprise to any of us. So as -- and there was one program back a number of years ago where we put CRM last as part of our telling you that -- I think it might have been 2007-ish. We -- our presentation to you was that there's still growth left in the CRM business, but the future will be in new growth drivers. And so that's playing out. What has surprised us is the extent of distress in the U.S. ICD business in 2011. That surprised us. And -- but the idea that we -- that longer-term are that the sustainability of a premium growth program will acquire growth drivers other than and diversification away from the Pacer and ICD business is something that we were talking about in 2007, and the fact that we have this much so that when you look at what's our pipeline of new growth drivers, what's the credibility of our diversification and transformation into a new growth program, what's the credibility of all that. The reason all of that is real is because we've been focused on it for so long. So you'll see the things that we're busy talking about today are the things that you will see be increased as a percent of our mix to replace the current percent of our mix that is Pacers and ICDs. So we see a lot of room here on the AF side that haven't talked about it. We see a lot of room on the cardiovascular side. Remember then here again, we had the heyday of cardiovascular with Angio-Seal with other products before that, and then we were done. And that was mature, and we needed to reinvent ourselves on the cardiovascular side. And it was a struggle. It wasn't so -- it was easy to conceive, hard to execute. And so we went a number of years where we really weren't talking about cardiovascular, and we're talking about the share gain and market growth on the ICD side and talking about AF is up and coming and then talking about okay. And now we're placing a bet and committed to making long-term investment in the neuromodulation space. And now after the level of work we've done to find the right new growth drivers in cardiovascular, knowing that we weren't going to get sucked into doing stents [ph] and that we had to find something else, or else, the franchise had lost its vitality, now you see the answer to all of the something else's that reinvents our cardiovascular franchise and that is part of our transformation from a prior growth program into a new growth program for St. Jude Medical. So exactly what our mix is 4 years out, we actually do model that, but we're going to -- not going to tell you. So we have rolling 5-year growth plan, as you would expect us to, and we show continued diversification. We show a more balanced portfolio, and we show encouraging acceleration of top line growth and sustainability of that accelerated sales growth rate.

Joseph James Devito

Okay. Let's see. Maybe just hand it to somebody. Let's just keep moving fast as we can and get to as many people as we can.

Michael Matson - Mizuho Securities USA Inc., Research Division

Mike Matson from Mizuho Securities. I just had a question on the FFR business and the FAME trials. I'm just wondering, FAME had some really good results, and now you've got FAME II. But even after FAME, FFR really hasn't become the standard of care. So why is that? And why is FAME II going to change that?

Joseph James Devito

What do you think about that, Frank?

Frank J. Callaghan

Well, first of all, with regard to being a standard of care, it fundamentally is in Europe. And it was all predicated upon the elevation of the guidelines to Class 1a in Europe. So it really -- it's not for every patient. It's really intended for outside of the acute STEMI patients of stable coronary artery disease would be the key patient population. But it is in Europe. As we get into the U.S., we think FAME II is going to be impactful with respect to a guideline, the potential for a guideline revision. And then with respect to it being a standard of care, when we look at the market, the market's growing, double digits, year-over-year. I think it's heading in the direction of being a standard of care, at least for those patients with stable coronary artery disease in certain non-STEMI patients. But it's heading in that direction. And the penetration in the PCIs is growing, and our business is growing. And so the market is growing.

Michael Matson - Mizuho Securities USA Inc., Research Division

Let me just have a follow-up on the TAVI product. How long is it going -- do you think it's going to take to get the other sizes approved in Europe and I guess the other kind of product line accessories that go along with that like the vascular closure, et cetera?

Frank J. Callaghan

So with respect to other sizes, the 23 millimeter is in trial now. We expect to bring the 25 millimeter into the trial here in 2012. We expect by the time we get into the first part of 2013, we'll have 2 sizes available on the market in Europe, the 23 millimeter and the 25 millimeter. When we think about the opportunity that comes from those valve sizes, we think about those 2 sizes that's giving us approximately 60% access to all patients. And so that'll be our initial opportunity in Europe. And then as we go forward, we will introduce you to other sizes there in the other years, and we'll just update you on our progress for the 27 millimeter and 29 millimeter as we get further along. But we've got 2 sizes to get a big part of the market here very quickly.

Adam T. Feinstein - Barclays Capital, Research Division

Adam Feinstein, Barclay's Capital. I appreciate the overview. And just my question is as we're in this environment where it's very focused on cost and there's a lot of focus right now as new products come on other market, getting them reimbursed by CMS, there's been some noise in the TAVI market with some of that. And even the cost of hospitals, they get ready to use this new technology. So just curious to get your thoughts in terms of factoring that into, as you think about new product areas, and even you hear it from the field in terms of how doctors think about it would be very helpful.

Daniel J. Starks

So let me start and then ask for others to comment. So this comes back to some of my opening comments that a very strong criterion for us in deciding where to make an investment is to sort through which technologies relatively will be winners and which technologies relatively will be losers in an environment where customers are increasingly rigorous and disciplined about what are they going to pay for and how much will they pay. So all of that, in our view, is -- comes under the rubric of comparative effectiveness. We think there are technologies that lose under comparative effectiveness. And I won't trash anybody's technology in particular, but there are technologies that are tempting in the short term, and we've stayed away from them because of our concern that over the long term, those technologies may not be winners in an environment, in some instances, where there's rationing of healthcare, and in other instances, where there is an increased sophistication of comparative effectiveness criteria. So we go after the spots where we think we're going to win with comparative effectiveness. That's why we went after FFR. That's why we're consolidating the OCT technology into our FFR platform. That's why it was worth it to us, and this comes back to Joanne's question a little bit. I didn't get to the last part about do we look at our CRM business as being a business that we're harvesting. Not entirely. There are parts of it that one might say there really is not innovation, and it's a matter of taking out cost, and it's a wonderful cash flow. But there are other parts of that business like the quadripolar CRT-D system. This is a winner under comparative effectiveness. And so we invested in it, and we have next generation, next generation, next generation and Eric Fain, and Doctor Corbisiero will talk about in the next prepared remarks. So it will then -- everything that every space, I mean, you could ask me about any single one of them. It would be how much money today is being spent on heart failure? How much money today is being spent on coronary artery disease? How much money today is being spent on stroke? How much money today is being spent on other heart rhythm disorders partly as a factor bearing on stroke? So atrial fibrillation or it might sudden cardiac death, migraine, depression. We're taking -- in every instance, we're only going after a space where it is sometimes hundreds of billions of dollars being spent today. And in every case, it's tens of billions of dollars being spent. And so we say, "All right, this is a commercial opportunity for us. We can make -- turn this into a new $2.5 billion, a new $5 billion market, and we'll save you money. At the same time, we're helping our shareholders." So that's our business model. That's exactly our business model.

Doctor Manoharan, with a European experience, what would you say from the clinical perspective?

Ganesh Manoharan

So that's exactly right, I think, in the current climate. And probably, that will not change even if we have more money. The robustness required by the commissioner to fund these -- people who will give you the money to do the procedures are often the same. They will expect cost benefit and quality of life saved. Those are kind of big things that people will look for. So in terms of CLOSURE I, it's the only true technology that I know of that have shown clinical benefit and cost benefit. So CLOSURE I is one of those that comes in the bottom right-hand corner, where it's both cost benefit and clinical benefit. So it's easy enough to convince all commissioners that there's something that we should be able to use. TAVI is actually the other arm that has shown that, that is both cost benefit and clinically beneficial to patients. Those are the only 2 technologies in medicine today that has met those criteria. Despite that, there are challenges, for sure, because surgery today is, what, GBP 15,000 to GBP 17,000. I don't know what that is in dollars, and TAVI is marginally more expensive. But like anything that is expensive with time, it will show a benefit despite that costing of TAVI today. It is still cost benefit. So it will upon disclosure, PFO closure, the new generation therapeutic drugs that are coming to show that is potentially more beneficial than warfarin. But remember, the device closure fixes your problem now, that's it, whereas a therapeutic agent will be there for the rest of the individual's life, for the lifetime of the individual. So if we put a device closure on the 30-year-old patient who had a recent stroke, that patient is treated then and there. You put them on third, fourth, fifth generation therapeutic drug, the patient lives to 90 years old. For 70 years, that person is going to be on a concurrent cost of GBP 20 000, GBP 30,000 a year of therapeutic drugs. So when you add all that up, and it's a no-brainer really to go down the device route, but you need to show evidence that it does what it does and then show that it's safe and then show that it's cost benefit.

Daniel J. Starks

And Bruce, if we get the microphone over to Bruce.

Bruce M. Nudell - Crédit Suisse AG, Research Division

Bruce Nudell, Credit Suisse. A question for Frank, and then one on TAVI. Frank, when we looked at the kind of non-MI FFR candidate population, it looked like 15%, maybe 20% of cases involve stent placement in lesions with less than 75% stenosis. Now as this -- I guess you could argue that there's another group of patients where there's less than 75% stenosis, but FFR would say you should put a stent in place. To what extent is are we just missing -- miscounting the percent of cases where stents replaced and kind of to low stenosis lesions? And to what extent is your 35% number really predicated on all the lesions less than 75% should be interrogated?

Frank J. Callaghan

Let me first direct the clinical questions to Doctor Manoharan, and then I'll come back to that one.

Ganesh Manoharan

So clinically, traditionally all of us looked at angiographic features of stenosis. So the guideline will say that I think above 50%, you will have a mandate to treat it. But increasingly, one man or woman's 50% is another man or woman's 10% and vice versa. So then is now becoming obvious. 50% actually is probably an over-estimate to treat a lesion. So a function of that is coming fair. And traditionally, we reuse medical profession imaging, MRI imaging, various other imaging modalities to justify to treat a lesion. Even that now has been shown to be not cost -- it tends to be cost prohibitive. Another patients go to 3 or 4 different steps of non-invasive testing, but they still end up getting an angiogram anyway. And then some of the patients, they obviously turn up to the cath lab, bypassing all of these other avenues. I think more recently, certainly in the U.S., there has been a huge publicity about inappropriate stenting. And that, I think, has created some real need for clinicians to have some sort of objective way of telling a patient, who has 30%, 40% lesions and clear symptomatic angina, that one of those lesions actually will heal down and be significant that you can then justify this stent safely and treat the patient appropriately without having to fear that somebody's going to suddenly come and look at all your 2,000 and 4,000 cases you've done in the last 20 years and come up with a figure that you've been inappropriately treating patients. So we have now, as clinicians, have accepted that there are essentially 3 types of PCI patients that are the acute MI. That is currently a no-brainer. If you know the lesions, you treat the lesions. At the same time, we now have evidence to show that in the corresponding artery that is not acute related and that is a lesion that is borderline, you can quite safely do an FFR on that artery today and decide whether or not you need to bring the patient back to treat the patient best. So that's cost saving there. The vast majority stenting that we do now is for the acute coronary syndromes, patients who came in with chest pain, have a troponin rise due to the high resolution troponin assessment. We take a lot of patients in that pool. So almost 70% to 80% of PCI today in Europe, anyway, is done for the acute coronary syndrome patient. Even in those patients, you can, on angiograms, see the acute artery versus a non-acute artery, and you can use that part to treat and -- treat them objectively rather than by the angiographic arm or in my view or in my eye, look significant. And then you have the stable angina, and that's where FAME II comes. In the stable angina patients, colleagues would have suggested that it's okay and safe and the right clinical thing not to treat or not to do intervene, either by bypass surgery or by PCI stenting. And FAME II has, I think, suggested that, actually, it is not okay to leave the patient who has stable angina but does have any a hemologically [ph] significant artery. But the data will become more -- will be presented in more detail. And the publication FAME II will show exactly what kind of patients benefit and did not benefit. But what I think FFR will give us today, and it's available today, is the objective treatment and the right treatment for the right patient.

Unknown Analyst

Okay. I guess with regards to TAVI, when you reposition it, the device, and re-sheath it partially, what are the distinctions of your devices is that just it could be partially deployed and you don't need to fast pace and the patients seem dynamically stable. When you reposition it and partially sheath it, do you still get that benefit? Is the heart effectively pumping during that process?

Ganesh Manoharan

The only comparative that you have with -- that I can give you is that is clinically available is Medtronic CoreValve. Medtronic CoreValve still allows you to go to this position. 70% or 80% deployed, the valve is functioning normally, and you have time to see what you're doing. The key difference between the Portico and all other devices today on clinical trial is that this device can be fully -- I showed the example of partial re-sheathment, but the device can be fully re-sheathed. So when you go from 80% of these and the functioning Portico valve to, say, a 20% of release and a nonfunctioning Portico valve, the native valve is functioning again. So in the 2 patients, we needed to re-sheath. We did not see any significant hemodynamic change. And the other important thing about this device we should note that in comparative to the Medtronic valve is because this valve is annular, when you have contact to the patient's annular, the Portico valve, actually, is already beginning to work. So you do not find the space where you have pressure and then no pressure for a while until you go to 2/3, which is what you need to do for the Medtronic valve because Medtronic valve is a super annular valve. So you need to go somewhere to release the valve before the valve will work. Again, the hemodynamic imbalance you're talking about is 10 to 15 seconds. So the new rapid pace will be for the patient is 15 to 20 seconds. So the patient actually -- now you know that all of the cases is that the patient's fully conscious and awake, and they are able to still talk and converse. And the transient loss of blood to the brain, fortunately, has not resulted in anything obvious. Sometimes they actually may be reasonably happy during the procedure, and I would not recommend it to all of you to do that, but who knows, there might not be another option, a therapeutic option available.

Joseph James Devito

We'll take another question. who's next? Wherever you can it get it first. Okay. One here, and then we'll come right over to you.

Robert A. Hopkins - BofA Merrill Lynch, Research Division

Bob Hopkins from Bank of America Merrill Lynch. Frank, a question on the renal denervation market, not so much St. Jude, but just your thoughts on how this market will develop outside the United States because obviously in the United States it is going to take some time. So if we look forward here to say 2014, do you think this can be a $300 million to $400 million market by that time?

Frank J. Callaghan

I don't think we're giving guidance outside of...

Robert A. Hopkins - BofA Merrill Lynch, Research Division

No, no, no, I'm not asking for...

Daniel J. Starks

Yes, I'm getting -- as you know, Frank is a disciplining me on rigor of our communications. Bob, in all seriousness, we don't know. You know that we don't know. The -- when you talk about that big of a number in this -- in that short of a period of time, that would be fairly aggressive. And I would guess, and nothing more than a guess, but I would guess that it'll take longer. But on the other hand, it's just -- it's too early. And so we've got to get -- we've got to go from the pioneering early-adopter work, which is really very encouraging, but that's still what we have now. We're still -- there's still a first-generation device to really -- what it's going to take is it's going to take the same level of correct clinical trials to develop this market. And so that's going to take time. And I suspect it'll take longer than 2014 to have that level of clinical trial work down and have it peer reviewed and to have duplicative trials and to really get this market going. But on the other hand, these early results are very encouraging. So we just look at it as we don't know how big it will get, how fast, but it's the right place to invest. And we'll work to make the most of it that we can in a very responsible, long-term perspective way.

Robert A. Hopkins - BofA Merrill Lynch, Research Division

And 2 other little follow-ups, Frank, on your product in renal denervation. Was any of your physician consultants that you're talking to about design concerned at all about safety of the device given that it is sort of a one-shot approach? I mean, one of the benefits potentially of Medtronic from a safety perspective is that you can start and stop depending on how deeply you're going and make sure that you're getting the right kind of burn. Just wondering if that came up at all, if that's a concern at all. And if not, why not? And then the other little follow-up I want to ask was just on PFO, and the same question that David asked around LAA, I wanted to see if -- your thoughts on some of the Coumadin replacement drug and how that might impact the PFO market, if at all, in your view.

Frank J. Callaghan

I think I've got your question right. That's actually surprisingly very hard to hear in this center seat here, but I think you're asking about safety on renal denervation. First, I wanted a comment -- I never intended to make any comment that we couldn't start and stop the ablation process. Of course, the physician is always going to have control over that. With respect to safety considerations for our program, I think I would characterize the safety discussion as being -- we've got the program that could potentially be more safe. And the reason for that is owing to the multi-electrode design and making it extremely unlikely to end up in a situation where you've got renal artery stenosis for one thing. So any safety conversations I've been a part of, involved in, very favorable in that regard, not negative.

Daniel J. Starks

On your second question Bob, on the impact of new drugs on the potential of a PFO market for stroke indication, if cryptogenic strokes disappear, without any PFO closures, we'll be the first to cheer. And at the same time, we think that's unlikely. So the -- all of the -- so it's all going to depend on the clinical data. And then at the same time that we'd say that, we -- I would also just add as a point of philosophy, in every emerging growth driver, there's a risk that it doesn't play out, and we would be the first to caution people that -- with this particular one, and now let's talk about the next one, let's talk about the next one, there's a risk that it won't play out. And some of them are going to be bitten by that risk, and they won't play out, no question about it. Others will get traction and turn into major new growth drivers. And we don't have perfect visibility into which one will be a winner and which one will be a loser, and that's part of the reason we're investing in so many.

Unknown Analyst

Three questions for Frank on the mitral program. One of the knocks on these percutaneous programs is that the MR reduction, even if you have an improvement, it still falls short of what you would typically call a success for open surgery. So I'm just curious in terms of what you think the goals would be for MR reduction for your program and what you would consider to be a success. And then could you compare and contrast the suturing approach with the clip approach that's commercially available today, what you think the potential advantages are? And then just a clarification on the transapical, is that truly a proof-of-concept approach? Or should we think about that as being sort of a backup to the transeptal?

Frank J. Callaghan

So with respect to your first question, the goals for MR reduction, I don't think we specifically have any goals in mind for reduction. When you look at the competitive technology out there, it's kind of a mixed bag when you look at the data coming in from the e-valve program. And I think that part of that has to do with, my impression and it's just my opinion, they sought that to be a solution for all patients with all indications. And I think we're going into this in a much more methodical way and really targeting initially, for example, posterior leaflet prolapse due to degenerative disease or chordal rupture. So I think by focusing on certain patients, and those patients where we are very confident that with our technology, we're going to be able to plicate and eliminate the MR. So that's going to be our initial focus. With respect to why we would -- why we think we're going to be different from the e-valve program with respect to the procedure itself, that's a very difficult procedure. And I don't know if maybe Doctor Manoharan can weigh in on this, but it's, as I understand the procedure, it's very complex. I've seen the device. I refer to it as the contraption, the contraption with 9 knobs that you need to diddle in the process of being able to position the clips so you can grab the 2 leaflets in the midst of the cardiac cycle. We're talking about a process that is, we think, is vastly superior. It's a simple transcatheter method. You -- and again, I'm going to be careful here because I don't want to talk about it, how we're doing it. You made a reference to sutures. I didn't specifically say it was sutures. It could be sutures, and it could be some other method. But our process is very straightforward, grab one leaflet, plicate it and then you're done. There's differences in that regard. And I'm sorry, I don't remember your...

Unknwon Analyst


Frank J. Callaghan

That's a great question. I don't think we fully know the answer to that yet, and that's going to depend upon things that obviously that's going to be opportunity for the cardiac surgeon. Cardiac surgeon is generally, today, okay, going in and doing an open procedure. There may be patients that are ineligible for that open procedure that you can get at with the transapical method. So it's not crystal clear yet how big that opportunity is, especially when transfemoral is available because that's clearly in our thinking as the preferred approach. But maybe Doctor Manoharan can weigh in on that.

Ganesh Manoharan

I think the key thing to remember is the mitral valve is not the aortic valve. We've learned that the aortic valve in comparison actually is a very simple valve, and the mitral valve is a far more complex anatomy and a far more complex area to get to. And it really is an apparatus. It's not really a valve. That's not such the case. It's got multiple causes for resuscitation and multiple ways of fixing it, both surgically and I think any technology that's developed for transapical approach. We'll need to look at what the surgeons do today and then develop techniques or of technology that will mimic what the surgeons do successfully. So the e-clip or the e-valve is a procedure that has limited use in the surgical arena. If you speak to any surgeons, some of them have abandoned it. But it's revived now to be the treatment for all cause of mitral regurgitation [ph], which does not seem to make sense. The technology, I don't think will be -- it has challenges in that once you deploy a clip in that patient cannot have any other form of treatment after that. So if a fully replacement technology comes up tomorrow and the patient got a clip today, that patient will not be accessible to that new technology. And we know that I know that lots of people in the market now are developing various options for transapical solutions for mitral valve disease.

Daniel J. Starks

So you've gone for 2.5 hours without a break. Let's take a break. And if we can limit it to 15 minutes. I know that's not too short for folks. We just want to keep driving here and get everyone the opportunity to get out of here sooner rather than later. So let's take a 15-minute break.


Daniel J. Starks

And for those of you who are here, we're starting to make the best use of your time. And it's my pleasure to introduce Eric Fain.

Eric Fain

Good morning, everybody. And this slide shows the topics that I'll be covering. And then I'll probably followed by Doctor Raffaele Corbisiero, who'll give his clinical perspective on our Quadripolar technology.

So first, just some discussion on overall CRM market dynamics. We expect the global CRM market to be about $11 billion in 2012 and to decline at a mid-single-digit rate on an as-reported basis with the U.S. and international markets having 2 distinct growth trajectories. Despite the expectation for the overall market decline, our growth plan is primarily driven through our expectation for share gains. And that's through having a full product pipeline, having differentiated features and technologies that can provide proof for clinical benefit and economic value and also our high-voltage replacement tailwind.

In the U.S., we expect the market for CRM to be about $5 billion in 2012. And we expect the market to eventually stabilize as the year progresses, as we come up on the anniversary of the Department of Justice investigations that caused significant market disruption through 2011.

We're well-positioned to continue our trend for share capture in 2012 and beyond through our strong U.S. product portfolio, led by our recently-released Unify Quadra, CRT-D system, through really be having a unique position in the industry to provide solutions-based approaches to the EP with our industry-leading combined CRM and AF portfolio, and again, our high-voltage replacement tailwind that started to have a meaningful impact in 2011.

As we've talked about previously, the replacement tailwind is driven by our history of share gains over the last 5 to 6 years. We estimate that we exited 2011 with about a 26% high-voltage share. And that's really composed of a de novo share of about 30%, which was -- is significantly higher than our replacement share of about 20%. And both of those share positions increased in 2011 on a year-over-year basis. Our replacement share will just naturally approach to our de novo share over time. So even if you assume a relatively flat de novo share, that still will represent about a 4% to 5% share increase over the coming years.

For the international market, we see the total CRM value as about $6 billion in 2012 with the market growing in the low-single digits on a constant-currency basis but with double-digit growth in Asia. As in the U.S., we expect to continue to take share through our customers having full access to the St. Jude Medical CRM portfolio, including devices such as Unify Quadra, our Accent MRI Pacemaker and our Fortify ST ICD, as well as new products that'll be introduced in 2012; through developing products that meet specific clinical and economic needs of emerging markets; through new distributor relationships, and in particular, our relationship with Nihon Kohden in Japan, who has distributed our EP and AF product lines now for about 20 years, and they'll be picking up our full CRM product portfolio, and again, having a really unique position with the electrophysiology customer and being able to provide really the complete suite of tools and products for them to do all their cases on the CRM and AF side.

For our core CRM product line, our strategy for share capture is really focusing on differentiating features and technologies that can provide evidence, again, for clinical benefit and economic value across all of our CRM product segments, including CRT, traditional ICDs and pacemakers.

So to start off with our Quadripolar technology, this is truly an exclusive leadership position. We should have a lead of multiple years in this space, and it really does provide an opportunity for major competitive advantage as the technology is established as truly the standard of care. This is the technology that benefits all of the stakeholders, including patients, implanting physicians, following physicians, hospital administration and payers. We have very strong clinical evidence, with more than 30 publications that highlight the clinical and economic advantages of the Quadripolar technology. And this translates into improved implant efficiencies and success, as Dan mentioned in his opening comments.

We've seen reduced overall procedure times, reduced flow times, higher success rates. And it's really because the technology allows for minimizing the trade-offs between optimal placement of the lead tip for electrical performance and placing a lead in the most stable position by not having to spend a lot of time trying to find the right target vessel and then seeing if the lead will work there. The lead is more easily implanted. We've also seen the evidence that shows the reduction in the most common complications associated with CRT, namely chronic nerve stimulation and the high-pacing thresholds. And we're also now seeing evidence of improved clinical outcomes benefit because the system allows for lead placement with an electrode positioned in the basal area of the heart in most patients.

With the launch in the U.S., the technology is now available in most major markets around the globe.

I think as we're now getting into our launch in the U.S., it's instructive to look back on what impact the technology has had. In Europe, as you recall, we introduced our first Quadra device, our Promote Quadra, which was in the larger-device format in the first half of 2010. And then last quarter, we introduced and launched our Unify Quadra platform in Europe.

Since the original introduction, we've gained at least 5.5 share points in the CRT-D segment. And that's been driven by a greater than 20% year-over-year unit growth in 2011. Well, we've also seen that people understand the value of the technology, so even with an environment with price pressure, we've been able to get a consistent ASP premium. The technology has allowed us to open over 200 new accounts where we had not done any CRT business in the previous 12 months, as well as taking us from a relatively disadvantaged position to an industry-leading position in terms of our CRT-D mix.

As you heard in our earnings call, the U.S. launch is off to a very strong start with strong contract uptake in over 150 contracts already in place. And I think that you should really think about each one of these contracts representing an expected increase in market share in those accounts. Doctor Corbisiero, again, will follow me and talk about his personal experience, but the early feedback that we received is very positive on things like the lead handling, the ability to place the lead in the primary target vessel, the value not only in de novo cases, but also in upgrade procedures, and I think most importantly, a strong belief in the clinical and economic value of the technology.

We really think about our Quadpole or Quadripolar technology as a true platform and not a single product. So our next generation, which adds MultiPoint Pacing extends the capability of the technology and really can take it to the next level of improving patient outcome. So the MultiPoint Pacing technology itself allows for stimulation in the left ventricle in 2 separate sites. And those pacing locations can be paced either simultaneously or with an LV delay. And this programmable timing really allows for improved optimization over single-site LV pacing, which is only available with our traditional Bi-V [ph] systems or with our original Quadpole system. And this optimization provides the ability to do things like beginning to pace around areas of scar that exist and also to pace earlier up near the base to try to get earlier mitral valve closure and increase cardiac output in patients who have significant mitral regurge, which is a common core morbidity in heart failure.

Our technology development for MultiPoint Pacing is complete. We've now received our CE mark and in 2012, we'll be initiating chronic studies to look at the ability of MultiPoint Pacing to improve CRT outcomes and reduce nonresponder rates.

We have acute data in humans that has been presented at meetings and some of the additional abstracts that are being presented at HRS this year to show the additional advantage of MultiPoint Pacing with acute hemodynamic changes. And these studies, both in the U.S. under an ID and in international markets, will further develop the clinical evidence and economic evidence of its value.

Our Ellipse ICD is our next-generation traditional single-chamber and dual-chamber ICD. And as we've seen with the success of our Unify and Fortify devices, we've seen that downsizing still matters, and it still can drive competitive share capture. The shape of this device was really decided on after talking to over 200 electrophysiologists around the globe to see what aspects are most important to them. And we really believe that we now have a device shape that provides the optimal balance of footprint, thickness, longevity and delivered energy. The Ellipse ICD will represent the smallest high-voltage device of all the major competitors. It's about 15% smaller in volume and about 15% thinner than our Fortify ICD.

We also have provided additional enhancements in terms of features, including expanded ShockGuard technology to further reduce inappropriate therapies. And with our Fortify and Fortify ST ICDs and our Unify and Unify Quadra CRT-Ds, we will clearly offer the most advanced portfolio of high-voltage devices in the marketplace.

We expect Ellipse to be available in the U.S. and in most international markets later in 2012.

ST segment monitoring is another unique and differentiating feature that's available only through St. Jude Medical products. The ST Monitoring feature in ICDs is now launched in all major markets around the globe except for the U.S. with rapid uptake in Japan after its launch in 2011 and consisting of providing consistent price premium in Europe as physicians see the value of the technology. In 2012, we'll be updating the features set to provide specific ST diagnostics that are associated with ventricular tachyarrhythmic events in addition to the diagnostics now that are provided in the event of acute coronary syndrome event.

We have begun our -- recently begun our ID study the United States, which will enroll approximately 5,200 patients at up to 200 centers. We've had a very good response in terms of investigator interest in the trial. And we'll continue that, along with initiating some additional studies with the new features in international markets.

The technology now is also available in our pacemaker platform with the Accent ST, and that device has also recently become CE marked.

We launched our Accent MRI pacemaker in the fourth quarter of last year internationally, and it's now available in 25 countries. As a reminder, this system provides for no body location or power restrictions, so being able to undergo MRIs without any compromise in terms of the imaging itself.

We also have a unique MRI activator option, which allows patients to go have their MRIs without the need for a technician and a programmer to be present. And that is also important in terms of managing resources and improving workflow. And the initial feedback that we've gotten in our launch is that physicians are really seeing the superiority of our system versus the competitors, and we did a marketing survey to a good number of physicians who participated in our initial launch, and the feedback again was a hand -- the majority physicians felt that the lead handling was as good as better as our existing brady leads and superior to competitor MRI leads.

We continue to work with FDA, and we now have expect to start our ID study later in the first half of this year. In addition to focusing on our core CRM product pipeline, we are also focusing on disruptive innovations that we believe can provide catalysts for new growth. And those are shown -- some of the areas are shown here and include heart failure monitoring, our MediGuide fluoroless navigation and leadless pacing.

So on the heart failure side, obviously, and everybody knows that heart failure is a huge problem around the globe, taking up the #1 position in terms of healthcare costs. Number of studies have been done over the past few years that have tried to show the impact on heart failure hospitalization rates, and only direct hemodynamic monitoring has ever been able to demonstrate the ability to significantly reduce the number of heart failure hospitalizations. The most recent studies of interest, the CHAMPION study, used pulmonary artery pressure measurement. And the HOMEOSTASIS trials used direct left atrial pressure measurement.

St. Jude Medical is positioned to lead the industry in hemodynamic monitoring with our late-stage programs with LAP and DynamicRx, as well as our investment in CardioMEMS. And we continue to see a very large opportunity in this space for managing heart failure patients.

Radiation exposure, especially for imaging procedures continues to be a very large issue, not only for the implanting physicians, but also for patients. And we have a very unique technology in our MediGuide fluoroless navigation system to address that. Last year at this meeting, you heard Doctor Hendrix described his initial clinical experience with using the MediGuide technology during AF procedures. And we're now at that stage for using the system to guide LV lead placement during CRT procedures.

The early MediGuide experience demonstrated a significant reduction in fluoroscopy during those AF procedures. And this was particularly important in CRT implants because that's where physicians have the maximum exposure to radiation, because as opposed to being down at the groin, they're standing up right at the shoulder of the patient with the source of radiation very close to them. In addition to the reduction in radiation, the MediGuide system, which includes specific software, as well as MediGuide-enabled tools, also can simplify and make the procedures more successful. And it can do this by providing a 3D reconstruction of the coronary venous anatomy, as well as providing information to identify the appropriate target vessel.

We expect to have CE marking and FDA clearance for the technology in the second half of 2012. So just in the last few weeks, we began our First-in-Human experience using the MediGuide system for CRT implantation at the Leipzig Heart Center. You see on the image on the left a static shot of the MediGuide images on top of a looped fluoro image. And you can see the MediGuide-enabled tools, first the coronary sign sinus sheet, cannulation sheet, the tip of the subselector catheter in this branch, and then you see the tip of the guide wire in the target vessel.

During the initial 5 cases, there were patients that had very challenging anatomies. They used the system to implant both our Quickflex µ, as well as our Quartet leads. I think most importantly, during these initial cases, the implanting physicians were able to perform the CS cannulation and subselection of the vessel using 0 fluoroscopy.

On the right side, you see a summary of the initial 5 cases. You see that the average fluoro time for these 5 MediGuide cases was 6.4 minutes skin-to-skin fluoroscopy time, and that compares very favorably to the Leipzig Heart Center's average of 16.4 minutes or 61% reduction in fluoro time in this very experienced CRT implanting center.

So these are the initial results. We're very excited about what we've seen so far. And we'll continue to gain experience and report out in future meetings.

Another area of focus for us is on our leadless pacing through our investment and partnership with Nanostim. Their device is a single-chamber VVIR rate responsive pacer. It's expected to have greater than 7 years of longevity with 100% pacing. It's a very small device, 1 cc, weighs about 2 grams. And not only is it designed for repositionability at the time of the implant procedure, but even more importantly, it's designed for retrievability chronically. So at the time of elective replacement. System's also designed for compatibility with our Merlin programmer.

The implant procedure itself is a very straightforward with not much of a learning curve. It can be done by electrophysiologist, but also by interventional cardiologists. And we think that this is an important point because we really see one of the big opportunities for this technology is in emerging markets where pacemaker penetration is relatively low and where the number of interventional cardiologists in those markets is much, much greater than electrophysiologists.

In terms of the status of the program, chronic animal testing of fully functional devices is now underway, and we are now expecting to have First-in-Human cases in the next year.

And then lastly, I'd like to just spend a little bit of time talking about our post-market studies that support the performance and reliability of our Optim and our Durata leads. So St. Jude Medical has, by far and away, the industry-leading prospective, actively monitored lead registries. And I want to make sure and just take a minute to talk about what we mean when we say prospective, actively monitored lead registry. Patients who enrolled in these studies around the time of their implant, whenever they have a follow-up visit, whether it's scheduled or unscheduled, or they have an adverse event, the center will fill out a case report form and send that back to the company. We also have a dedicated group of field employees who are tasked with just going to these centers to make sure and monitor and make sure that not only is the data that's coming back to us accurate, but also that there's no missing data.

So this is very different than the passive sort of reporting that gets done with just complaints and return devices, which really forms the basis for all of the company's product performance reports. So in terms of the specific registries for our Optim and Durata leads, we have 3 large registries. The first one is our OPTIMUM Registry that was begun in August of 2006 with the introduction of our Optim lead insulation. And in the OPTIMUM Registry, we have almost 6,000 Durata and Riata ST Optim leads that were implanted in over 200 sites, and that registry is now been ongoing for more than 5 years.

Our SCORE Registry was started in September of 2007.

We have over 3,100 Durata and Riata ST leads that were implanted at 58 sites. And that registry has now been ongoing for more than 4 years. And then finally, we have our SJ4 post-approval study that was begun in June of 2009 with the introduction of our DF4 version of our Durata leads. We have almost 1,700 DF4 Durata leads that were implanted also at 58 sites with greater than 2.5 years of follow-up in that registry.

So if you look at the combined experience for the prospective actively monitored registries, we really have an extremely large patient cohort that represents the true commercial experience. And I can say the true commercial experience because those combined registries have over 10,800 defibrillation leads that were implanted at 292 clinical sites by 571 implanting physicians. So really, a very, very broad-based experience that's included in these registries. The registries collectively have been running now for more than 5 years and we have over 24,000 patient years of follow-up.

The table in the middle of the slide shows the parameters of most interest for the combined registries. So first at the top, there have been no instances of externalized conductors in these leads.

Moving down to the second line, the all-cause insulation abrasion, which would include any instances of externalized conductors which we have not had, plus any lead-to-lead abrasion, lead-to-can abrasion, any other internal abrasion would be in this category. And we have a very low rate there of 0.02%.

And then finally, all-cause mechanical failures, which would include all of the abrasion failures plus things like fractures or failures due to crimping or welds, also extremely low at 0.09%.

Now we have this comprehensive program in place, but to make it even more robust, we're instituting an independent analysis committee that's going to be headed up by a cardiologist, who is not an EP, who has no ties to the device industry and they'll oversee the analysis of this combined registry going forward and will report the results out in our biannual product performance report.

So just to maybe summarize our overall experience with our Optim and Durata leads, there have been over 280,000 Optim defibrillation leads implanted thus far, including approximately 250,000 Durata leads. We have over 5 years of clinical experience. There have been no occurrences of externalized conductors and a very low incidence of all-cause mechanical failures. I think from the clinical perspective and the patient perspective, it's really that all-cause mechanical failure that's the parameter we're really focused on. The data from our complaints and returns that goes into our product performance report, as well as the data from our active registries support, the excellent performance of the leads by any measure, and overall, customer confidence in Durata leads remains high. And I think the best data point to give you on that customer confidence is shown below.

In the fourth quarter of 2011, our U.S. tachy lead-to-de novo device ratio remains greater than 1. So what that means is that we are still selling more defibrillation leads than we are high-voltage devices. And that ratio is actually higher today than it was prior to the Fidelis leads recall. So again, good data that supports that the majority of customers and our customers have very high confidence in our Durata defibrillation leads.

So to summarize, the CRM market should show signs of stabilizing in 2012. We have a unique position in the industry to be able to offer to the electrophysiologist, solutions, a solutions-based approach with unmatched strength across all of the CRM product segments, paired with our industry-leading AF portfolio. The data provides very high confidence in the performance or reliability of our Durata leads. And therefore, we're well-positioned for share capture in 2012 and beyond.

So with that, I'd like to introduce Dr. Raffaele Corbisiero, who's Director of Electrophysiology at the Deborah Heart and Lung Center in Brown Mills, New Jersey. Dr. Corbisiero?

Raffaele Corbisiero

Thank you. I'm going to give a talk about my clinical experience with the new Quadripolar lead. I thought you guys would appreciate this. The balancing act obviously that we're always doing, obviously, is more on the clinical side but more growingly, we're always looking at the economic cost of what we do.

So in terms of where we're at with device therapy, I'm out to tell you that sudden cardiac arrest still remains the largest cause of death in the United States, almost outwinning all cancer. And heart failure remains a huge problem as you've just heard, the #1 DRG in this country. There are multiple prophylactic devices now available for sudden cardiac arrest. There are no medications for that.

In terms of congestive heart failure we have a problem that occurs in these patients, almost 1/3 of the time, which is called the dyssynchrony, which can be helped by resynchronization devices. And we're at a point now where we are implanting prophylactic CRT devices.

But we still have a little bit of a problem. In terms of penetrance in this country, of the 5 patients that need the device, only one are getting it. And then we have issues, once the device is implanted, and I'm going to focus mainly on the CRT devices. We have a 30% non-responder rate, which is unacceptable. So in order to overcome dyssynchrony, we have to place a lead in the coronary sinus, towards the left side of the heart and then we're subject to the variation in the vein anatomy. And there are multiple problems with that. Sometimes the target areas are hard-to-reach and sometimes there are problems with that target area.

And that's summarized here. CRT pacing complications at implant: Number 1, is the phrenic nerve stimulation, which is a huge problem. The phrenic nerve runs down the lateral side of both sides of the heart and tends to be right where our best positioning wants it to be. High pacing thresholds tend to be an issue. And also lead dislodgement, usually as a result of trying to overcome one or 2 of the other problems.

Surgical lead revision increases the risk of the associated pocket re-entry. And then you are having this trade-off between lead stability and optimal pacing location. And that can be difficult, and that's going to affect your CRT efficacy.

So on the current system, it allows 2 methods of trying to take care of all these problems, whether it be phrenic nerve stimulation, whether it be high thresholds or dislodgement. One option is to revise the lead, which is a repeat surgical procedure. I have to remind everyone that infection rates for redos go up quite a bit to 8% to 11%, as compared to de novo implants, which is about 1% to 3%.

The second option in dealing with this problem is simply to shut off the lead. In which case, we are reverting back to a heart failure patient with no added benefit of CRT.

In terms of the economics of the option for one, which is a repositioning of the lead, it is one of the lowest productive procedures we can do in our labs. And if I continue to do those, I'll continue to get phone calls from my administrators regarding the margin of these procedures.

At our hospital, we have a daily census and a reposition on the lead doesn't even count as part of the census of what we're doing.

Now option 2 is to effectively make your patient a non-responder and continue with congestive heart failure. And that's added cost to the patients as well. As we all know very soon, the cost of readmissions for heart failure are going to be taken by the hospital, no longer by the insurance companies. So we have to address this.

As we heard, you -- not only do we have the place the lead towards the left side of the heart, we just can't place it anywhere. We have to be cognizant of where we're placing it. This is a study from MADIT-CRT which was a prophylactic CRT study that show that the apical position may not be the best to place it, so we can get a lead over there. We can avoid phrenic nerve stimulation, get it to pace with a decent threshold, and not have a dislodge, but it may not be the best area. Not only will you not get a response, you'll have a negative effect with increased heart failure admissions and even mortality here.

Now, why is it that we have to find the right response? It's extremely important because we have to decrease the heart failure, but if we can do that and get a response, we'll also see benefits in other areas. This is a chart showing that we have a decrease in ventricular arrhythmias. So if we can improve the heart failure, we can see a decrease in ventricular arrhythmias and decrease in shocks. There's also a subsequent data out from Dr. Singh from MADIT-CRT, that if we got a response, a positive response with these CRTs, we will also decrease the amount of atrial arrhythmias. And that's a huge plus, that's a whole another market. But if we can decrease the amount of A-Fib in heart failure patients, that's another tremendous benefit.

So what's come out is this Quadripolar lead, which you've just heard about. It has 4 poles and effectively, it can almost take up half the length of the myocardium in the heart. It gives us 10 possible pacing configurations. It also enables us to use different sites with unconventional vectors.

So as I stated, here's the problems that we can see, phrenic nerve stimulation, high thresholds, dislodgement and non-response. These are all things that either have a negative impact on our CRT. Our options are revisions, which we talked about, an increased cost to us, as well as lead off, which is not going to help us because we're going to have -- note there are people with heart failure, repeated admissions for heart failure.

So how can the Quad help us with this? Let's take a look. This is from the IDE done by Dr. Tomassoni that looked at the phrenic nerve stimulation. And in 100% of patients, we could overcome phrenic nerve stimulation. 74% of which by just using different vectors, 26% by just adjusting voltage. Now this is a pretty common theme with this lead. And it's unusual to say, but phrenic nerve stimulation, we can get around 100% of the time.

This is interesting as well as -- from a lab-efficiency perspective. Duray reported that in 21% of cases with bipolar LV leads, the first choice of patients was not suitable, and then you ended up trying to micromanage that lead placement, and then you'd have instability or just high pacing thresholds. The average additional time in the lab for repositioning was another 20 minutes of fluoroscopy.

This is a study by Viani out of Europace that looked at the surgical revision rate in the Quartet lead. And in this -- in the study it was reported, 0% had to go for a lead revision. Now there are small studies all across Europe, that looked at -- but the surgical revision rate is significantly decreased with this Quadripolar lead.

Okay. So looks like we could overcome lead position and we can overcome phrenic nerve stimulation. Here's an issue that comes up. The lead is stable. You don't want to have phrenic nerve stimulation. You've seen the patient -- at evaluation and realize, the patient is still not a responder CRT. So what are the options before we try to completely reposition the lead or do some other extraordinary efforts to try to get this patient to respond to device therapy?

This again is from Dr. Tomassoni that looked at the ability to correct the problem which is to synchronate, using nonconventional vectors that are only available with this quad lead. And pacing with nonconventional vectors resulted in the greatest reduction of dyssynchrony in 63%, 83% and 80% of the patients at 24 -- should be 24 months -- 24 hours, 3 and 6 months, respectively, sorry.

If only conventional vectors were used, LV resynchronization would not have been achieved in 3 patients. So I just want to show my personal experiences in lead with this shot. This is just a simple dye shot. Now, I didn't go further with this because I saw little nub, and I wanted to see how this lead handled. This is actually my first implant done several months ago. And if you just watched this, doing it without dye, and I want to get a feel for how this lead handles because one of the concerns is, with extra electrodes, was this going to handle as well? And here, it looks like it's a relatively difficult position, and I'm manipulating the lead, and I'm able to do things, actually that I was very impressed with, in the sense that I didn't think I was going to do this with this lead. I was able to find a decent spot.

This is an example for -- just to show you what I've been talking about. This is phrenic nerve stimulation that you see on the left-hand side and there's the diaphragm contracting. And if I could just play the next one. I haven't moved the lead at all. I haven't given up any stability. And just with a simple reprogramming, I now have CRT therapy with no phrenic nerve stimulation.

This is an example of, again, placing the lead right there. And I'm not moving it in anyway. I'm not giving up any stability. And what I'm looking for now is what I talked about last which is trying to get a hemodynamic response. And what I'm looking for is in this lead, I'm trying to have a positive R wave response without any phrenic -- without phrenic nerve stimulation. I don't want a negative pure SMV 1 [ph]. This is what I'm looking for. And I was able to achieve this in several seconds of programming as opposed to several minutes of trying to manipulate the lead around.

So this is my experience. I have 24 total Unify Quadra system implants to date, have 8 upgrades from bipolar CRT devices due to phrenic nerve stimulation or high thresholds. I have 7 non-responders to CRT upgraded to the Quadra that have not been readmitted, though short time. And I have 4 upgrades from competitive ICDs. I have a significant reduction in procedure time and fluoroscopy time, around 25% compared to a standard CRT case. No cases with phrenic nerve stimulation or high thresholds could not be resolved without reprogramming. 0. 33% reduction in LV capture thresholds were noted. No lead dislodgements to date. And to date, no non-responders with this therapy.

So with that, I would say that the Quadripolar lead is an a quantum leap that ensures CRT therapy can be delivered, and possibly more effectively than before. And this may go beyond clinical benefit and have positive financial impact in the treatment of congestive heart failure. And with that, I'm going to end.

Daniel J. Starks

Thank you very much, Dr. Corbisiero. And Dr. Corbisiero will be back to the stage and be happy to take your questions after the next 2 presentations. I'd like to remind you that a buffet lunch is now available. Please enjoy our hospitality if you care to. However, we are going to keep working and work to complete the highlights of our program and give you the opportunity to get on to your next agenda item. And with that, I'm happy to introduce the President of our Atrial Fibrillation Division business, Jane Song.

Jane J. Song

Good morning, everyone. I'd like to spend the next 10 to 15 minutes just giving you a brief update on our AF program. And why I believe there's sustainable growth. And in fact, you will see that we're actually very excited, so pleased, we have a lot of new products coming to our U.S. market. I'm not going to talk about our products per se because my guest speaker will talk about the details of his personal experience with our new products.

So kind of a overview, of our sustainable AF growth and our revenue and in our procedures, and what's the potential market size opportunity is in the space. Just mentioning the key product launches we are very excited about in the U.S. and Europe, and for the future, what you envision as the future of EP lab integration for our safety, for efficiency and for basically a procedure that not just has products but has procedural flow from beginning to the end of a procedure. And then, I'll end with an update on our IDE studies to give you what the status of our product approval are in the U.S.

You've seen this slide before. As Dan mentioned, on the demographic side, as you know, AF is a disease of the age. And we have a lot of aging population. So the compound growth just in the U.S., Japan and Western Europe is growth, more people have AF every single year. From 2011 to 2012, we estimate 14.5 million people to 14.8 million for CAGR of 2%.

Even if you take a very conservative estimate of what procedure for EP case might be, at $4,500. In fact, most of the cases were about $7,000 to $8,000. The reason why I'm being conservative is, I've made an estimation on lower products with the ablation catheter and also with the ablation for the diagnostic catheter. So an average case price of $4,500 a case. We expect that there was about 260,000 AF procedures in 2011, and we think it's going to go grow about to 20% to 311,000 cases in 2012 for a 20% growth in 1 year. That estimation to a market size of about 1.1 billion to 1.3 billion. In fact, you'll see in my market slide, in 2012, the revenue for the AF procedure will be greater than all EP procedures for ablation for instance of flutter, VT, or all other cases. So AF growth has overtaken. There's still more procedures done in the other cases. However, the revenue per case is much higher for AF procedures.

The growth in ablation procedures. Once we started first tracking into 2005, we estimate, there was 79,000 cases in Western Europe, Japan and U.S. for AF. The last 7 years, we're estimating that it's going to grow to 311,000 cases, which is greater than 20% CAGR, about 22% increase every single year.

As far as the products that AFD division participates in, we're estimating a market revenue of $2.4 million. And as I mentioned, $1.3 billion is just for the AF procedures alone.

In the first quarter -- I mean, the earnings, we say we're talking about AF division having a revenue of $885 million to $950 million. That equates to about 37% to 38% market share. Currently, we have approximately 37% of the market share. We expect the market to grow from 9% to 11%, double-digits. And if you notice, we still consider the biggest pie to be in the EP ablation, which is $710 million for 2012. And that's why our focus has been on the ablation side because that is our area of the biggest improvement, especially in the U.S.

Once again, I'd like to show this slide because St. Jude Medical is the only company that has a total comprehensive portfolio of AF products. We have all the way from the access to [indiscernible] to a basically, ICE catheters for [indiscernible] access, diagnostics, whether it's catheters or IP recording system, advanced mapping with our 3D Velocity system, and you'll see that we also have software for our CONTACT technology to estimate the actual transfer of energy so that you know when you have actual contact from the tip of your catheter to the tissue before you ablate, so you could have efficacious ablation.

On the advance ablation side, we have our 6-hole irrigated catheter, and then we introduced our 12-hole, adding 6 more holes to the proximal size for a more uniform cooling. And then we introduced a most efficient design, which is called our Cool Flex. In the first year that we markets the Cool Flex in Europe, it took market share, and is now the majority of our ablation catheters sold in Europe. We also have our epicardial ablation for our surgical with our HIFU system. And on the complementary side, as mentioned, we have our MediGuide system, which I'll talk about. And our VantageView system, which is basically a large monitor that integrates all the small monitors for our systems and labs. And of course, we have our CONFIRM AF, which is already approved in Europe, and we expect approval in the U.S. for AF indication within the [ph] quarter.

Just key product launches, this is not an exhausted list. We'll be launching more than 10 products this year. But the one side I'm really imploring for our success for 2012 are 3 products for the U.S. We just received approval for our Safire BLU Duo, and our Therapy Cool Path Duo Bi-directional catheter in the U.S. We'll be launching our new generation of next generation anti-velocity software with our OneModel. And these is the software that Dan was speaking about, where you actually have, in some cases, better imaging than a CT image. Because if you remember, CT image is prerecorded and done previously, while the OneModel is performed during the procedure. So therefore, you may even have more detail and you'll see this. And the third one that we're also going to talk about is the MediGuide.

The 3 products that Dr. Chinitz will talk about today is his experience with Safire BLU Duo Catheter, his experience with our anti-velocity software. He was one of the few technology-assessment centers, and he will also talk about the CONTACT technology. His center was one of the first early ones doing animal studies and now he is also the principal investigator for the IDE study the U.S.

Just an update on MediGuide implementation. Last year at this time, we only had one center in Leipzig. We have completed our new technology assessment in Europe. We have several centers up and running. We expect to get started in the U.S. and the second half of this year. As mentioned, we have already have our Livewire Decapolar Diagnostic Catheter approved both in Europe and the U.S. We expect to put the MediGuide center on our Safire BLU Duo, Cool Path Duo Catheter and we expect approval in Europe, first half of this year. And second half of the year, we'll be integrating our newest software that we think will be a game changer with the MediGuide technology, so that this will be the premier software for our velocity MediGuide integration.

We receive similar comments from our other centers in Europe. Basically, that there really is no learning curve. Because it's the procedure that you do today. And the one that I like the best is, if you don't have to be experienced or an expect to get the same accuracy, anyone can do it. All the procedures with the coronary sinus catheter and the diagnostic catheters have gone very well. The only complaint I received is, as we have more and more implementation is, where is the ablation catheters? So it's finally coming. Because once we have the ablation catheter, we will have the total toolset for MediGuide technology for AF ablation.

On the left side you will see that the images, the real flouro case, and the right side is a prerecorded cine loop utilizing MediGuide technology and what's live is the catheter -- diagnostic catheter on the image on the right side.

Having said that, what's the future for St. Jude Medical AF Division? As I mentioned, we now have all the elements to make a very efficient product for our AF cases. And what we're looking at is how we make it efficient in the lab itself and safe, in a very consistent procedure. We are the leader in all of the key equipment in the lab. We've got the velocity. We have the MediGuide technology. We have the recording system. We have the chronic stimulator. And we also have our ViewMate ICE diagnostic tool for visualization.

And we saw it this last year, we looked at the lab and said, what are the things that will offer efficiency and procedural, make the case go well, consistent across all the procedures. And one of the things we looked at was, having a one-single monitor. This is a 56-inch, high-definition monitor. You could have up to 16 inputs, and you can visualize up to 8 different inputs. Therefore all the different monitors for every single systems could be placed or could be remotely away from the EP or in the OR room or the EP room. And therefore, you could have 1 screen. It could be stored for each physician's preference so that you don't have to remember what, how the physician wants to look at the different lab equipment. And we're also going to be having software that basically has connectivity to the hospital. We already have these 3 modules. The EnSite Courier module basically takes all the images from EnSite Velocity and you can store in the hospital network. At the same time, you could take our CT or MR image that's already recorded in the hospital network and retrieve it to the velocity system.

The EnSite Derexi, provides efficiency between our WorkMate and our Velocity. Instead of having 2 operators entering the same information and patient information, you could enter once and the information is shared between the EP WorkMate and the Velocity system. Therefore, this efficiency and synchronization have potentially one less operator. And the EP-WorkNet, that is a PC software for your laptop or your PC, and you could retrieve all the WorkMate studies and download it to your EP, laptops or PCs.

And then what we envision is, taking all those elements of the EP lab equipment and consolidating. This is a picture of our EP lab in St. Paul, Advanced Technology Center. And we're talking about MediGuide integration with all our EP lab equipment. And basically, only having one power cord and one cable cord, and consolidating all the equipment and the amplifier and the computers in one stack, and having all the interconnections and fiber optics.

We do see the junction boxes, all the connections for the patients down to one box. We think this will equate to basically less noise in the lab, much less smaller footprint, a better workflow and efficiency, and a better consistency of liability in the EP lab and of course, for the procedure itself. So this is our vision for the future that we are working on right now.

Just a quick update, as Dan mentioned, we are the leader in supporting market development studies. As mentioned, we're the #1 supporter for CABANA, which basically aims to bring AF ablation from second-line therapy to first-line therapy. The EAST trial, which is a European trial where you can actually reduce stroke if you have early intervention of medical management, including ablation, versus normal medical management.

And the ASSERT, which was just published in the New England Journal of Medicine, where there was a linkage between asymptomatic Atrial Fibrillation with the increase of ischemic stroke. In fact, it's a 2.5% increase in risk. This goes back to the Canadian studies a few years ago when they said. You're better off having some symptomatic AF, because at least you know you have AF and you could do something about it, versus not knowing about it and finding out you had AF after you have a massive stroke.

Update on the IDE studies. These are 4 studies that are ongoing in the U.S. The first 2 are for AF indications and the third and fourth is for flutter indication. The IRASE AF, if you remember, is for our first catheter to have AF indication. It's a one-to-one manualization between ThermoCool and Safire BLU Duo. We just finished enrollment in January and we're right now, waiting for the one year follow-up.

On the CONVERT AF, it's a concomitant AF procedure with open heart surgery for permanent AF, and it's not randomized. We're about 80% complete with enrollment. We expect completion in enrollment, second half of this year as a 6-month follow-up.

So 2 new studies, as I mentioned, the Cool Flex catheter, which is a winner outside the U.S. already. And we just started last year, and we expect enrollment to complete, second half of this year.

And the last study is to get our approval for CONTACT, which is going to be -- Dr. Larry Chinitz will talk about it. He is the principal investigator for this study. It's 150 patients, and includes 25 centers in the U.S. and Canada. And we expect to enroll -- complete the enrollment by second half of this year.

And then with that, I would like to introduce Dr. Larry Chinitz. He is a Professor of Medicine in cardiology at NYU. He's also the Director at Electrophysiology and Invasive Cardiology in the Harvard Center. And he was also the second highest in role of the IRASE AF study by one patient. And the principal investigator for our CONTACT study.

Larry Chinitz

Not that there's any competition involved in the study. Well, good morning, everyone. Thank you for inviting me. I was not exactly sure what I could say that would be helpful to you. So I thought I would just spend my time on my own take and experience related to our technology for the treatment of Atrial Fibrillation.

So we have 6 laboratories in our 3 hospital system at New York University, soon to possibly get 2 others in another institution. And I -- just on a personal note, we -- each of our laboratories is fully equipped with all mapping technologies and all catheter technologies that are available to us. And I would tell you that in the overwhelming number of those cases, literally an excess of 95% of our experience, we have chosen St. Jude's technology. We have found that, that technology coincides best with our work habit. It has been enabling technology that we feel has allowed us to do things somewhat better. We have a very long history of working with the company on this technology, both in the development of animal studies and clinical trials. They have helped us to listen to our feedback to make products that we thought were better.

And finally, as Jane had told you, it is the only company that we worked with for somebody who is still involved in Atrial Fibrillation as I am. It is the only company that has committed to Atrial Fibrillation completely, through the breadth of our activities and products. So it makes it easier for us to partner with a single company that seems to be so involved.

I am very enthusiastic about the Atrial Fibrillation volume and growth over the next several years; that the mostly factorial enthusiastic approach because there is an increasing acceptance by the community of catheter ablation of Atrial Fibrillation. Our national organizations have included us more fully in guidelines as second-line therapy and in some areas, approaching first-line therapy.

As you've seen, the population continues to age so the number of patients that are approaching for treatment of Atrial Fibrillation, again continues to increase. We've also shown that despite our trials to create drugs that are more effective for the treatment of Atrial Fibrillation, we have failed repeatedly. I think the Dronedarone trials that you've recently heard about is an example of a drug that came to our market with great enthusiasm in terms of the safety and efficacy profile, but in fact, has really not kept up and is losing market substantially.

So just to show you a little bit about what is at NYU, and you can see that our laboratory volume has increased steadily year-by-year on a very steady growth unit. If you look at our Atrial Fibrillation volume, the top line is complex, which is Atrial Fibrillation, and the bottom, is the more standard catheter ablation and procedures. We have experienced the sustained and incremental growth in this A-Fib population for the reasons that I have told you before.

The other thing that has come to light is that the success rate, which has always been questioned in multiple institutions also has improved. We are claiming that in the most stringent of success, meaning that freedom from all arrhythmias, off all drugs, after a single procedure, which, again, is the most stringent guideline for success, we're getting a conservative 75% of our patients to eliminate Atrial Fibrillation. For those of you who's followed it, this is a profound statement of the potential for cure of such a common and problematic disease.

This is the 2006 guidelines in which catheter ablation was first noted as the potential alternative. It was a Class IIa Level C. It's currently now a Class I indication in the written guidelines as of 2011. That is true, another major advance for the acceptance of catheter ablation of Atrial Fibrillation.

So then the question becomes what are the challenges that confront us to continue to do better, to continue to improve market share and to be more successful? And they are fairly simple. The first is that we need to improve upon the reliability of mapping. We are not cardiac surgeons. We do rip open the chest and have direct visualization of the heart to do very intricate movements. All of us -- all of our information is inferred from catheters that are moving around the heart and we don't actually literally see them. So we need 3-dimensional electrical, anatomic mapping systems, with great precision to do what we have to accomplish. The second thing is as once we get there, and we're sure about the position, we have to give an effective lesion. That may sound intuitively easy, but it actually is incredibly hard because you're never quite sure whether you're in contact, you don't know how much power is actually going into the tissue, you know how much power is coming out of your generator, but you do not know how that is transmitted to the tissue.

The walls of the left atrium where we perform Atrial Fibrillation are approximately 3 to 4 millimeters thick in the most important areas. There is a very small margin between success and utter devastation. So we need to improve upon that safety profile.

And finally, we have had a lot of repeat procedures, patients who go and need to come back again. This is a drain to our healthcare system. It's diminishing returns to our hospital. So we need to get it right the first time and not bring them back. As many of you know, Medicare is now experimenting with us, and we're participating in this, in which we get a single global fee for the disease, over a 32-day period. And that's going to include preparation for the procedure, performance of the procedure and whatever happens in the next 30 days. And you can bring them back 5x or 0x. You're going to get the same exact payment to the hospital. So everybody is totally geared in on not readmitting patients to the hospital. So if we are to be successful and economically viable, we need to look at each of these factors continually.

So just to show you a little bit of science. This is what the left atrium musculature looks like. It is a very complex structure, with various forms of muscular tissue throughout the body of the atrium and into the pulmonary vein. And again, we don't see that so we need to infer that. And this is the older technology. On your right is actually an actual segmented left atrium from the patient's CAT scan. And on the left is a 3-dimensional model that we created with the original -- or not the original, but a more recent NavX version, where you see the right atrium in purple and the left atrium in gray, trying to simulate what we see there. And in fact, that's the model that we actually can visualize our catheter and move. But it is just an approximation, and our lesions can be 6 millimeters in diameter. So a one-centimeter variation on where you think you do will create failure. So we use that and we thought that was pretty good until we started to see this. And this is the newest version of the Velocity system that we use for our Atrial Fibrillation. On the right, you can see the CAT scan, on the left is, in fact, the new models that we can create with incredibly more accuracy and precision, and allowing us to visualize the edges of the wall and the position of the catheter. This is reality that we are currently using and I cannot emphasize how this enables us to do things more safely and more effectively.

So this mapping tool, which is called the OneModel Tool, the conventional map is what you see on your left, the newer map is what you see on the right. And the conventional map, it created this cloud of dust in approximation. Imagine that there was a sort of a balloon and then as the catheter moved out, it spread out that balloon and to this structure which sort of resembled the left atrium but didn't really get it all that well. And you had to spend a lot of time editing it and trying to infer what reality really was. The new tool, the one map tool enwraps them -- model, eliminating a lot of that false space. It also has a new technology to allow us to gate to the respiratory cycle. So we realize these patients are breathing. And every time they breathe, things moved: The catheters moved, the models moved, and we need to gate the model to their respiratory cycle so we don't make additional errors, and this adapted respiratory compensation that this new technology has, has helped us tremendously.

So this is what it looks like on our workstation. On your right is the CAT scan, on the left is this wrap -- tightly wrapped model that's created rather quickly. So there is a substantial reduction in the amount of time it takes to collect all of those points to make that model, and there's a substantial reduction in the editing time, which could be almost to half an hour to eliminate all that false space, which currently doesn't exist. So with our early experience, we have had great accuracy and great efficiency in developing these models, and that's pretty important. There have been some studies that have published, that have shown the accuracy, looking at the size of the veins, comparing it directly to the CAT scan and comparing it to, this is published the most recently by the Massachusetts General Hospital, comparing the 2 technologies. You can see on the left is the CAT scan. There is the point cloud, the conventional map and then the new map, created in one fell swoop as opposed to individual structures. I'm not going to spend too much time on that technology, but this is a major event.

And finally, what we can now do is the colors that you see on the left is actually the electrical data that we get from moving the catheter around. So now, we can combine the electrical data and the anatomic data in a single acquisition in the course of about 15 minutes to really experience the realtime electrical data that's required to do this precision work. Again, emphasizing that this is a very substantial advancement in the tools that we used that we have never had before. And again, this is finally, you could actually manipulate this to make the entire model transparent, and just see this highly translucent geometry with the edge, and the edge allows you to see the location of your catheter.

So very substantial, and again, this is the adaptive respiratory compensation that added to the model, is very helpful. So the last time I presented at an investor conference was about 12 years ago, I remember. And probably not you, people, but some of your colleagues asked me a question at the end saying, what do you think is the most important advance will be over the next several years in catheter ablation? And I was the only person on that panel who said that it was all about lesion delivery. And that if you get a great model, and you can good, good catheters, but you have to be able to have catheters that can create the efficient lesions without collateral damage and make sure that you have a good transmural lesion. And I have to say that I do believe that.

So let me just show you a little bit of the science. This is a heat gun, looking at a catheter on the surface. Red is hot, blue is cold. This is a non-irrigated catheter, basically burning the end of cardio surface, showing you how hot it gets in that area. We also see a lot of stuff floating away from the catheter into the space, and that's lost energy due to non-contact. So whatever part of that catheter is not in contact with the tissue, is lost energy. And everything that's in contact is subject to this great heat.

We have now catheters that are called irrigated catheters, meaning at the tip of the catheter, there's a sprinkler and it's irrigating the endocardial surface. And what you see is that the surface stays cool, it stays blue, that -- and then the lesion gets to the endocardial surface without charring the actual surface. It's not perfect and you see that there's a heat, red stuff, yellow stuff, proximal as well. So this is the older form of irrigated catheter that were a tremendous improvement. But again, you see how much heat is lost into the issue. So the purpose of this slide is to show you there were 2 aspects to lesion delivery. One is that you have to have good contact, because whatever is not in contact is going to be lost. And the second thing is if you have to have good irrigation so you prevent charring.

So just to reemphasize. The reason this is so important is there are a lot of structures that fit adjacent to that the 3-millimeter posterior wall of the left atrium, most notably the esophagus, most notably the phrenic nerve and the lung. So that your ability to give a lesion to a 3-millimeter substance -- substrate without invoking injury to the esophagus and we live in fear of that. This is some of the work that we do in our animal laboratory to show you that here is an animal study in which we thought we are giving a beautiful lesion, but you see collateral damage to the lung despite the fact that we thought all the parameters were good. Showing you again that we just are not as good as we think.

So we have had the privilege of working with new irrigated catheters, and this is the St. Jude's version of irrigation, the Safire BLU and the Cool Path. And it's different than in the current irrigated catheters because of the nature of the irrigation. So it is a 12-hole design, which in our experience has provided more uniform cooling. You do not get that proximal heat that I showed you in the older versions of the irrigated catheter.

The other thing is, is what's important is our procedures often take 4 or 5 hours. If you are constantly irrigating the heart over a 4-or 5-hour period, there's a lot of fluid, and at the end of some of our procedures, our patients come out with 4-5 liters of fluid, which is problematic. The Duo catheter and the Safire have substantially less irrigation, much less fluid, leading to the potential for more safer procedures.

Some of the technical data, the blue -- the purple line show you that with the 12-holed irrigation, the surface of the heart remains a lot cooler, there's less charring and if the surface remains cooler, we can deliver more energy with the more efficacious lesions. The clinical trials have been done in the U.S. When compared to the standard irrigation catheter it has shown that the number of lesions that are required for success were low. The procedure time was shorter. The amount of fluid administration during the procedure was substantially less, success seemed to be better and adverse effects were lower. This is very profound data. It's early. It's small numbers but it is quite substantial.

And the last topic, in my opinion, which is one of the most important, is the concept of contact. So if you ask an experienced electrophysiologist to hold the catheter and touch the heart, they will tell you every single time, I know exactly when I'm touching, I know where I'm touching, I know how effectively I am and I'm the best guy in the world. And in fact, now we have data to show that, that is never the case. And as experienced as you are, the concept of touching is a hard one to do. So we have had tools like electrograms, fluoroscopy, echocardiography, mapping to try to help us, but in fact, up-to-date, none of them have worked. Just against again some science, most of these animals studies that I'm going to show you have been done by one of the senior EP guys in our laboratory. His name is Doug Holmes, who's very familiar with this. But he has showed that when you move the catheter around near the heart and you looked at the electrogram, those electrograms really don't change. EP guys often use the size of the electrogram as the manifestation of contact and it just doesn't bear out. Earlier studies also show that in peds monitoring, another standard tool for contact does not correlate well.

In the recent contact force trials, so this technology by other companies that use force to determine contact, it shows when you asked operators, when do have a good contact and blinded them to the force, you show that nobody really understood. Sometimes, they thought they had good, they had bad force. Sometimes it was very excessive. In these force trials which are now published, the most recent, in last month's Heart Rhythm Journal, showed that of all the lesions that were given with force, 12% of them were totally ineffective because they never really had contact. They also show that 82% of them had excessive force in that the operator not really realizing it. In one of the patients that were published, it shows that the percentage of patients that had very high contact, meaning 100 grams, was actually very high and high -- sorry, getting too enthusiastic here. High contact correlated directly with the development of tapenade. And that's the parameter that the operators really never had before.

So the -- St. Jude's answer to this, said, we have worked on is something that's called contact sensing and the difference is quite simple. If you look at the left, you see a catheter that's applied to the surface of the heart, but really only the tip of the catheter of the surface area of the electrode is touching. And even if you gave 5 grams of contact, only 25% of the electrode was actually in contact with the issue, which means that all of the other part of the energy that came out of the electrode was just floating away into air. So if you dialed in 50 watts, you were really only giving 4 watts of energy to the tissue. Whereas here, if the tip of the catheter was enclosed by the tissue, covering the service area, it was greater, even if you had 20% of the force, you had 75% of the electrode in contact, and that's what really correlates to energy delivery. Energy delivery is the concept that how much of that electrode is in contact with the tissue and how much energy are you giving. And that's what contact sensing is trying to achieve. It achieves that through algorithms that measure impedance locally as opposed to globally, and I won't get into the details, but it gives you a local impedance that allows you to translate into electrode contact as opposed to force. So that if pushing means you get more of the electrode in contact of the tissue, you can measure that.

Here's just a quick example of -- to drive home the difference. On the upper left-hand corner, you see the catheter -- both of them may have the exact same force but the catheter of the right has much more efficient energy delivery because more of the tip is surrounded. And you can measure that not through force, but through an electrical coupling index. On the bottom, you could see that if you were in a stiff tissue like you see on the right, you can push really hard but you have very little of the electrode. Whereas if you're in compliant tissue, force, and yes, I may correlate a little bit better. The operator doesn't know when they're in stiff tissue and when their tissue is compliant, we don't know when we're trabeculated. We need feedback and this is the first time that we have a feedback.

So very quickly, Doug's study showed us, this is stuff done in our animal laboratory that we could actually predict the transmurality and the lesion depth much better with this than with anything else. He was able to show a level of contact that correlated extraordinarily highly with the delivery of transmurality. Okay? So not only telling you that you're in contact, but telling you that you delivered an efficacious lesion by the feedback from contact sensing.

This has been studied in Europe and an A-Fib trial, and it showed that if you use contact sensing, you had much more efficacious lesion delivery, you have many fewer touch-ups that were required and leading to us, a more successful -- I'm sorry, more successful procedure. We have begun to contact A-Flutter trial in the U.S. using the CONTACT technology in our laboratory. The early experience has been quite positive.

And in conclusion, so what we want to do is we want to give the operator a direct feedback so that if you achieve a certain amount of contact, you can get to what we call is a sweet spot, where you're going to correlate heavily with transmurality and avoid the problems of too little or too much contact. This has never been available to operators of catheter ablation before. This is in my opinion, contact sensing is really the game changer of energy delivery.

And then if we loop that information back to our mapping system, we can create color coded dots on the mapping system to tell us where we had good contact and where we had bad contact, to allow us to get back to areas, utilizing that information.

So in conclusion, I do believe that contact will improve lesion formation, reduce adverse effects and that when we then combine that to our generators and our mapping systems, we will have a feedback group that is substantial.

And I also think that if you look at all of the risks of catheter ablation, which include embolization, flutters, injury to adjacent tissues, it's all because of inadequate lesion delivery. So not only could we potentially give better lesions but potentially we'll have fewer adverse effects.

Daniel J. Starks

And let me invite the rest of the other members of the panel to join us. And we will open it up for Q&A, and maybe this time we can start toward the back since we didn't -- start midway and work back to get to people we didn't get to the first time. And so go ahead and we're still just convening the panel. So for those of you who are not in the room, our panel for this Q&A consists of Mike Rousseau, Group President; Denis Gestin, President of our International Division; Dr. Corbisiero; Eric Fain, Product for the Management Division; Jane Song, President of our Atrial Fibrillation business; and Dr. Chinitz.

So with that, we're happy to take your questions. Yes, sir?

David H. Roman - Goldman Sachs Group Inc., Research Division

David Roman, Goldman Sachs. Dr. Chinitz, I was hoping you could comment on a session that we think took place on the Boston AF symposium that started the question some of the long-term efficacy on pulmonary vein isolation. It is also featured in the newsletter from that conference as well. Maybe just get your perspective if you saw those data and any feedback you'd have on the commentary from them?

Larry Chinitz

No, I certainly do. And I think that we all have seen that. Up until the present time, we're not as clear as we need to be about how effective the lesions that we give, how durable they are. So the mantra at the Boston AF meeting was durability of lesion delivery. So that's all relevant to the things that we talked about. We did not have the technology to give us any feedback that when we stepped on the pedal, we were truly delivering an efficacious lesion. So I do think that earlier results are not as robust as they need to be and I think that it is this technology that at least gives the us the potential to do things different. But I agree with that non-durability.

David H. Roman - Goldman Sachs Group Inc., Research Division

And then maybe, Dan, you could talk about if you're thinking on how you should model in and factor in some of the new products that you've talked about into our thinking of the company. If you look at some of the results in Europe, clearly, Neuromodulation for migraine is stepping up pretty nicely due to the [indiscernible] that you put out. You talked about the approval of the PFO closure for stroke, x US and obviously you had Quadpole out for some time in those markets. Should we look at Europe as a good precursor for how you think that -- how we think the U.S. launch that some this products should go? And then maybe, in Europe, 4% to 7% constant currency guidance, what type of new products assumptions have you made in there?

Daniel J. Starks

Europe is a little bit of a mixed bag as a precursor for U.S. uptake. As we've mentioned in the past -- and I'll ask Denis Gestin to elaborate a little bit, but what I'm going to do is I'm going to the benefit of the education Denis has given me on factors that limit the rate of uptake in Europe for technologies, which when brought to the United States can take up much quicker. So it's partly, it's the tender, the impact of tender cycles in Europe. It's also the fact that when we get CE mark in Europe, that does not equate to a release of the technology to all of the CE mark countries. There are other additional country-specific regulatory requirements as a practical matter that we have to get through. Those are the first 2 things that especially catch my attention that are characteristic of dynamics in Europe that are not found here in United States. Denis, what else is on your short list of characteristics of technology uptake in Europe?

Denis M. Gestin

Maybe the only thing we could add to those comments, Dan, is the fact that some tenders are going around for 2 to 3 years. So I mean that recycle to be viewed, and I think at one of the slides that Eric was showing today is giving you the perspective on how you could see the ramp-up of the technologies in Europe over the quarters.

Daniel J. Starks

So there is at least a little bit of background without yet talking about any particular product class and I won't -- my answer will frustrate you a little bit on breaking things out more in our 4% to 7% guidance, cons tant currency organic growth here for 2012. But all of the uptake considerations that we have visibility into, we have included when we've given that guidance. So in every case, there's quite an element of art in our guidance range, and it depends specifically on the technology that you might be referring to with respect to European experience versus U.S. experience. What we look to for Europe, in particular, would be -- we get leading indicators. And so it's not a perfect model at all but where it's on the market, where it fits with the tender cycle, what's the rate of penetration we've got with the technology, was it encouraging, was it discouraging, did we miss something, did it meet our internal forecast expectations. Those are the kinds of things that we take into account, and our track record that way is a little bit mixed. Sometimes, our experience is, in fact, discouraging to us. It seems like we ought to make more progress quicker, but other times it really validates that this is what we thought it was. In the case of CRT-D, it validated our expectation that the European uptake was what we thought it was. It got us into labs that we hadn't been able to get into before. It was a decisive motivating factor to convert business over the St. Jude Medical, and it put us at a level where our CRT-D as a percent of our mix was above the industry average tied coincident with the introduction of the technology. So all that of that would -- and then there were other offsets in the European experience with other market dynamics all together unrelated to CRT-D that were part of our experience. But all of that, when you net it all out and say, "Okay, now let's get more specific." CRT-D, in particular, we are optimistic that we have a disruptive technology for the U.S. And although it will take time and although it wouldn't surprise me to end up saying, "Boy, it was harder than we thought and it took longer than we thought." That so often is the case, and that really is just under the -- under promised and over delivered. We do dial that into the guidance that we give.

Next question. Where's the microphone? Just get it to people as quick as we can, and we'll take as many questions as we can.

Miroslava Minkova - Leerink Swann LLC, Research Division

Miroslava Minkova, Leerink Swann. Question for Eric. The Durata concern or Riata concerns, how do you make physicians more comfortable with Durata? I appreciate you have all these registries out there. But we talked to doctors who are still being influenced by your competitors and quite honestly don't believe the data. And could that somehow impede the quadripolar uptake given that you will need to use the Durata lead with the quadripolar system?

Daniel J. Starks

Let me offer a little bit just because I can't resist and then, Eric, please comment, and Dr. Corbisiero and Dr. Chinitz as well. We have quite a bit of expertise, and I maybe the least qualified even though I'm starting to move my mouth first. But the sort-through, our current market share and sort-through the number of centers where we really don't do meaningful business, when you qualify the feedback that you get -- so it is one thing to have people who are very close to another company who really don't do much business with us to say, "I'm not going to use their product." And so we have never said here that we think that with our current product line, we're going to move from about a 26% ICD market share up to something above a 50% share. There are going to be a lot of people, and we expect there to continue to be a lot of people who prefer to do business with someone other than us at least for the time being. And so a lot of the -- I think a lot of the feedback that you would get would be -- that would be very negative to our view would be people with whom we don't have good communications, people with whom we have no particular credibility, people who really are listening to someone else standing behind the throne, whispering into one's ear and just saying, even though that may be several hundred centers and even though that's 600 doctors, there are all lying and it's not true. I mean the data is the data. And over time, these data will be -- will just carry the day. Innuendo will not carry the day in the face of third-party, objective, reproduce-able, broad, clinical experience showing the reliability the reliability of data. And so another thought that comes to my mind is if you've got an organization that is terribly innovative, if you have an organization that is more rigorous, more focused, more proactive in generating transparency of reliability data than anybody else in the space and the data is, in fact, pristine, and if you are a competitor and your own pipeline is barren, and you are faced with significant loss of market share and it's going to happen and we'll enjoy doing our part to make that happen, what do you say? And -- but the only thing left to say is, "Well, you're ugly." My point is -- and so that's what comes to my mind with some of the innuendo with absolutely no fact to just say, "Well, you just never know." And it reminds me of the -- maybe I should already have been quiet, but it reminds me of the press release from one of these companies with the DF4 connector that just came out here in this last week. If that was me, I would have been embarrassed to issue the press release. St. Jude Medical got first implant at the Cleveland clinic in June of 2009. Here, over 2.5 years later, they finally got one, too. And my response to that would be, "Well, ours has been on the market, too, over 2.5 years, and theirs has just come on." You just never know whether that's a safe connector to use. I mean that's not what innovation is about. That's not what a leader in a high-tech medical device industry is about, is to talk about just you never know. It's about innovation, and it's about high quality systems, and it's about significant proactive registries with good transparency of reliability data. So that would my opening comments, and then maybe Eric might have something more to say.

Eric Fain

Tough act to follow. No, I think Dan hit on the high points. We obviously have our registry data and that's what we're going to continue to follow and make that transparent, and we're going to report out on that combined registry data in our product performance reports so physicians will be able to see updates on that every 6 months. And I think, again, to go back to the point I made in my presentation, if you look at the high-voltage lead to de novo ratio, that's our customer base. And our customer base still has that, where we're selling more leads than we are devices. We'd like that, obviously, to move up on the device portion of that. But certainly, if you thought about customers who have a good experience with our leads but are not implanting those leads on our devices, that, I would think, would be the most vulnerable portion of that business. And we continue, again, to have the data to support that customers do have confidence in the groups that are using us on a regular basis.

Michael T. Rousseau

I'd just like to comment. I mean, speculation is always a lot of fun but at some point, you have to be scientific. I remember several years ago, everyone was sure that the Riata had an increased perforation rate. There wase case reports, and Boston had mentioned it. And yet when you went through the data, and we actually got our own paper published on this this in Pace [ph], it really wasn't the case. I mean, you have to sit back and wait for all the data before you can make any conclusions on this.

Miroslava Minkova - Leerink Swann LLC, Research Division

Great, that was more than I asked for. Let me follow up with a question for Dr. Chinitz on AF. The contact sensing technology, do you think we're there with the -- is this what it takes to create a durable consistent lesion and to get the procedure more reproduce-able, if you will? And perhaps, how does exactly St. Jude's technology differentiate from what we see from some of their competitors out there?

Larry Chinitz

I don't think that we're there yet because -- in the animal lab today doing more experiments. But I do think that contacts of some form is the most important technology that we have to create durable lesions. So will it be combination of contact sensing, contact force? How will this develop over time? I'm not quite sure, but I do think that feedback to the operator to the degree of contact will be the most significant innovation in creating more durable lesions. I do believe that.

Daniel J. Starks

And let's get the microphone to someone else. Yes, sir.

Raj Denhoy - Jefferies & Company, Inc., Research Division

Raj Denhoy from Jefferies. Two questions, if I could. First on the CRM market, the only things you guys have mentioned, and a lot of other companies as well, is that the anniversarying of the Department of Justice investigation could have a good effect on this market in a sense. And yet, that remains a very opaque endeavor on the part of the DOJ. And I'm curious if you have any insight as to when we might see some sort of resolution from them on that and what resolution -- what that resolution may look like?

Daniel J. Starks

We don't have any insight. And just to be direct with you, we don't -- the Department of Justice does not confide in us in any way about. We have no insight.

Raj Denhoy - Jefferies & Company, Inc., Research Division

Do any of the clinicians have any sense of what's happening maybe in their institutions in terms of the DOJ?

Larry Chinitz

I haven't had any experience with them yet.

Daniel J. Starks

Sorry, we're not helping you much.

Raj Denhoy - Jefferies & Company, Inc., Research Division

That's fair. And my second question is on the MultiPoint Pacing with the Quartet lead. I'm curious, does that require an additional can? Is it a software upgrade? Is that something that's already available on that device already?

Eric Fain

So it's a separate model with the device. It uses the same lead. It's the platform -- as Dan mentioned, we developed our products from now on, what we've called this consolidated platform that gives us a lot of flexibility. So it's really adding that feature set to now the unified Quartet device that we have today.

Larry Biegelsen - Wells Fargo Securities, LLC, Research Division

Larry Biegelsen, Wells Fargo. A question for Jane and Dr. Chinitz. Topera has captured a lot of attention in the EP community. I'm just curious to know if you think that their approach to mapping is competitive or complementary with your mapping. Do you think you can replicate what they're doing internally without infringing their IP? And how strong do you think their clinical data is? I think they have a study from one site.

Daniel J. Starks

I'm going to -- Dr. Chinitz, if you could make any comments, I'll ask you to do so. But what I'm going to say first is that, we're generally not going to provide an original evaluation of someone else's technology here in this forum. So it's a good question. I know it's on your mind, but we're not -- and we have plenty of things to say about it, but we're not going to say them. I will say that -- but as a scientific basis, Dr. Chinitz, I would never try to stop you from making a comment if there's one that you want to make. I don't know if you have any comment about it. But St. Jude Medical, we will keep our kind of proprietary competitive assessments to ourselves here for the time being. Dr. Chinitz, go ahead.

Larry Chinitz

I don't think you want me to say anything.

Daniel J. Starks

Well, I'll just give you a chance.

Larry Chinitz

All right, so just a minute. We think their science is very cool. We don't really know how it will factor into what we're doing, I think, and a lot of developments needs to be done. I don't think it does away with the mapping stuff and the lesion delivery that we talked about. It's just another way to get to the important sites, but it's cool.

Daniel J. Starks

And now who -- go ahead.

Steven M. Lichtman - Oppenheimer & Co. Inc., Research Division

Steve Lichtman, Oppenheimer. Two questions. First for Eric or Mike, you talked about the expectation of some signs of stabilization in the U.S. IPD market here in '12. How much of that is just the anniversary of the big step down from last year? And how much are things you were seeing in the field in terms of less of the DOJ overhang or patients who were delayed due to guideline adherence starting to come back? Just any color there would be helpful. And then for Jane, can you remind us what is the incremental capital equipment commitment for hospitals on MediGuide? And if it is significant, what kind of data you'll show on cost benefit?

Daniel J. Starks

The first part, I actually got a little bit distracted. I didn't here that first question. There's someone in the position to comment on the first question?

Michael T. Rousseau

Yes, it's the market stabilization point. I think at the point of customer, the centers themselves, they've now been through a rigorous audit process to a vast extent. Just about any place you go in the country, either they're under audit or have been through an audit. And they've become somewhat expert in how to manage those audits as time has gone on. So I see a very rigorous process that they go through to make sure that they are within the guidelines. So I think on a go-forward basis, the market is now a lot smarter about how to manage the requirements, and that has brought about a lot of stabilization. We'll see it unfold here in the next couple of quarters. So there's potential light at the end of the tunnel, but we really want to look at this in multi-quarters, I think.

Daniel J. Starks

And on your question about the capital aspects of the MediGuide, it is a piece of capital equipment. As in most cases, the real interest in the technology would be on the ongoing flow of disposable products. But we're just not quite launching it yet, and so we won't answer the question about the commercialization strategy quite yet. But it will be a mix of capital and disposables.

So now who's got a microphone? Yes?

Kristen M. Stewart - Deutsche Bank AG, Research Division

It's Kristen Stewart from Deutsche Bank. Dan, I just wanted to go back to what you had talked about in the earlier sessions since I didn't ask a question on it before. You had mentioned about the cost savings of $150 million, that should come in 2013. Should we think about that as plenty of buffer room? It certainly seems like it to absorb some of the medical device tax to ensure double-digit growth in that period.

Daniel J. Starks

In your question, there were 2 of words of what you said that I missed. You said should we think about it, what?

Kristen M. Stewart - Deutsche Bank AG, Research Division

If you think about it, just so that you can absorb the medical device tax...

Daniel J. Starks

It's definitely a huge factor, and that's one reasonable way to think about it.

Kristen M. Stewart - Deutsche Bank AG, Research Division

Okay. And then secondarily, thinking about the cardiac rhythm management business model, are you thinking about any different ways in terms of structuring the sales force going forward?

Daniel J. Starks

Well, what I would say, on the topic of restructuring, we actually have been very vigorous restructuring generally throughout 2011, and you saw this reflected in the level of special charges that we've given visibility to. And some of this restructuring will go on through 2012, particularly our relocation of manufacturing and other operations out of Sweden. We -- you also will see that we did restructure within our U.S. division. We did restructure within our International Division. We did restructuring across divisions in the field, as well as with other functions spanning Neuromodulation and our cardiac rhythm management business and USD business. We did restructuring in our cardiovascular business to further integrate and take out cost across the legacy AGA and the legacy cardiovascular division business. So there has been a lot of restructuring, few details of which have been highly visible, but a lot of which has been then going on behind the scenes as you get some sense of the enormity of it in the level of special charges that you see. As far as any kind of a strategic major shift on the U.S. side related to CRM, I really don't think we envisioned it. Mike, I don't know if have any additional comments?

Michael T. Rousseau

The only thing that I would add is as we have now consolidated the neuro sales force into USD. We are realizing both the opportunity and the efficiency of our systems. And we spoke at length, I think, over the last several years, about developing our infrastructure from a systems perspective. And now we're starting to see the outcome there. So I think that we've become more efficient, and I think it has allowed us both from an inventory management insight into our business on a go forward basis, from a planning perspective, as well as performance management tool in really understanding the markets and our accounts. So we're fully realizing, if you will, that opportunity, the fact that we're moving to a tablet platform across the entire organization. The way that we educate and train and teach, all moving to on apps-based philosophy. So over the next several years, I think that you'll see efficiency in that part of our business.

Daniel J. Starks

Another thing that Mike Rousseau and President of our U.S. Division, Joel Becker, have done is they've continued to increase productivity and take costs out at the general level of communication with the economic buyers [ph] within our customer base. So you can imagine wherever we could identify an efficiency that would be good for the total productivity of the business and not take away from the speciality that our customers value, we've really captured it or have plans to continue to improved in the way that the capture it, at the same time, giving a very high priority with this level of new product development. We continue to place a very high priority on having a good level of dedicated speciality product focused at the direct clinical customer level to keep our credibility and to make sure that the technology is presented in the right way and supported clinically in the right way.

Let's see now, now who's got it? Okay, go ahead.

Brooks E. West - Piper Jaffray Companies, Research Division

Brooks West with Piper Jaffrey. Eric, I wanted to ask 2 questions on some data in your slides. First, on the ICD replacement cycle, how would you have us think about that now as a tailwind for Saint Jude? And I remember 2009, 2010, at this meeting, you presented some line graphs that showed a big bolus in expected replacement share from obviously share gains 5 to 7 years earlier. Do you still see something like that? Is it more of a self-fulfilling cycle now based on de novo share gains? That's question 1. Question 2 is the data point you gave on your tacky leads to de novo device ratio remains above 1. Has that changed since the European Cardiology Meeting where the Riata data was first presented?

Eric Fain

Sure. So let me answer the second question first. So just as a data point and just as it turns out, the number in the fourth quarter was exactly the same as it was in the second quarter, so just as another point of reference for that. In terms of their replacements, I think we're seeing what we said that we were going to see. We started to see a meaningful impact in 2011, and it's really -- it's trying to look at all the different device models with all combination of longevities between single chamber, dual chamber CRT, over the period of time in the last 5 to 6 years as we consistently gain shares. So I think it won't be a step function, but it will be a gradual increase of impact from that replacement tailwind as we move through the next 4 to 5 years.

Daniel J. Starks

Yes, sir.

Robert A. Hopkins - BofA Merrill Lynch, Research Division

Bob Hopkins from Bank of America. Eric, just a couple for you. I apologize if I missed this earlier, but I was wondering if on Ellipse, you could talk a little bit more detail in terms of the timing of that launch this year. Is that an HRS event? And again, I'm sorry I missed that. And just can you talk about that in a little more detail if you wouldn't mind?

Daniel J. Starks

So I'll take that. I'm a quick learner. And based on last year and relying on processes that are outside our direct control, I'm not going to make any direct prediction on exactly when we expect to have approval for Ellipse. But we believe that it will be sometime in 2012. Until then, we'll hope for upside surprise and -- but that's probably all I'd want to say just based on current unpredictability of the process.

Robert A. Hopkins - BofA Merrill Lynch, Research Division

I guess another way of asking the question is, is it in guidance?

Daniel J. Starks

Everything is. Yes.

Robert A. Hopkins - BofA Merrill Lynch, Research Division

So is approval assumed in guidance?

Daniel J. Starks

Yes, it is. Well, I mean the timing of the approval is one of the things we took into account in formulating our guidance. But if we have erred, we believe we've erred on the side of being conservative.

Robert A. Hopkins - BofA Merrill Lynch, Research Division

Again, I'm just trying to put the launch in perspective. I mean this is something that's a...

Daniel J. Starks

Bob, as soon as we get approval, we'd tell you. I mean we -- it's just that we can't predict the process, so we're being conservative. In our modeling, we're being conservative because it's clear to us that we can't predict the process.

Robert A. Hopkins - BofA Merrill Lynch, Research Division

Right. And I guess what I'm just trying to gauge is how important a device is this to the St. Jude franchise. And then I just had one other follow-up question on the HRS meeting upcoming, because we talked a lot about how important clinical data is. And I'm just wondering what should we expect out of that meeting in terms of new clinical data on either Riata or Durata? And do you plan on representing some of the data that you've talked to -- talked about here today?

Eric Fain

Well, in terms of the HRS meeting, I mean, we know that there's a number of abstracts there had been submitted, some on -- primarily on Riata, some on Durata as well. We don't know what will be accepted and what won't. Some of the information that -- has already been presented at the summit meeting that occurred last month. Some of those talks were 5 presenters who had submitted those data to the HRS meeting. So I don't expect to see those, as well as some of additional things. In terms of our own plans, we plan to, again, communicate as frequently as we can and really use the vehicle of our product performance report, which comes out every 6 months, once in the fall, once in the spring, to continue to update physicians on the performance. We also, as I mentioned, are putting in place this independent committee to review the registry data. And while I don't suspect that there'll be anything at HRS, because there won't be time for them to do that and go through the data, I do expect them to also come out with a publication after their initial review.

Daniel J. Starks

But let me jump in and add a little bit. I want to make sure that none of my prior comments would be mistaken with respect to Durata, and I want to segregate comments that would be directed to the Durata product reliability and the pristine record and the 11,000 ICD units of high voltage and 27,000 units all together and the 5-year follow-up data showing best-in-class reliability. So those data, the more of that, that comes out, the better and the more -- and keep in mind that those data are data that are more complete in our world than they are in the world reported by other players in the CRM space. So we're including reliability data from the first 30 days following implant, which at least one other company does not. We're including data from these multiple active registries, whereas one organization has a very small limited active registry, and that's it. So all of that is going to continue to come out and all of that is what my prior comments were directed to, and that's very different than the Riata topic. On the Riata topic, which is a different lead construction, it's a different material, yet there is a lot about it that is a significantly different platform. There, there is an identified failure mechanism. There's an identified rate of failure. We've been very transparent and proactive. We take that very seriously. That is a huge deal to us. The idea that the impact of any device failure on patient safety and on patient care, none of my prior comments were oriented toward what I'm now talking about. Anything relating to patient care, patient safety, patient welfare, we are tremendously concerned and focused on it. We did an advisory on this topic, remember, in December of 2010. Some regulatory bodies around the world characterized that advisory as a recall, some did not, but the communication was clearly an advisory to the clinical community. We were the one to solve that first and make sure that we went out to tell everybody as much as we knew with the commitment that we will continue to follow this. We reorganized our product performance report. We broke out the particular failure mode that was of most interest to people in a separate column to make sure that we would get good marks for being all over it and out in front of all of the issues, and that we would get credit for fully meeting our accountability to give as much engineering and clinical data to the clinical community as we had and as we could provide to help clinicians make the best decisions for their patients. So there -- yes, there is going to be -- we will continue to be all over that. As we've announced previously, we have initiated an additional clinical trial to follow these patients that have externalized connectors in the Riata family of late. And so I want to make sure that when you say Riata, Durata, that's what some would like to have you say. And they're not the same at all even though they both end in A. It's -- Riata is a totally separate set of issues. Durata is pristine, robust, and we're winning with it.

Okay, yes.

Derrick Sung - Sanford C. Bernstein & Co., LLC., Research Division

Derrick Sung, Sanford Bernstein. Dan, just a quick follow-up on the comments that you just made. On Durata, do you have any plans at all to introduce a new lead into the marketplace that might have a different construction than Durata at some point, just to even simply dispel some of the innuendos that are out there? Or do you have so much confidence in Durata that this is the lead that you're going to stick with for now until forever?

Daniel J. Starks

Well, if you already have 11,000 leads with 5-year follow-up data, with a 0.02% failure rate associated with it, which was consistent with what Eric had in his slide, and if you're concerned about innuendo about that, then one would have to be concerned about innuendo about everything, all of which is bad for patients. It's bad for the clinical community. It confuses the data it hurts the market. It scares patients. It keeps patients from getting the state-of-the-art medical technology available to them. It keeps them from getting medical care that would help their health. So the solution isn't to create a new lead and new data over a 5-year period and say, "Well just please don't cast innuendo against that." The solution is to behave in a high-quality market-leading way with -- based on data and based on optimizing patient care. That's the solution. It's not a new lead.

Derrick Sung - Sanford C. Bernstein & Co., LLC., Research Division

Okay, fair enough. And for Eric, a question on your expectations for Quadra share gains. So obviously that's a technology that's clearly advanced technology in the CRT-D area. But if you look at the total addressable market for CRT-D, and I guess it'd be following prone [ph] primarily de novo devices for the Quardra device, it's probably maybe 1/3 or so of the U.S. market. So I guess what I'm wondering is in your expectations for share gain, how much of that share gain is purely share gain in the CRT-D category and how much of it is share gain that trickles over to your non-CRT devices? And then also, maybe on top of that, you could break that out to perhaps how much expectation of mix is going into your share gain assumptions and how much does mix contribute to that?

Eric Fain

So I think -- I mean, just in general terms, so we really look at this as really changing the game in CRT. And when I think about the experience that we've had in Europe, our initial experience that we've had in the U.S., other places in the world, I haven't really been associated with a product that has had this much uniform positive feedback. And it gives us the ability to really talk about it as being -- as becoming state-of-the-art. I think that when I think about the potential complications in CRT procedures, and Dr. Corbisiero can add to this, it's really hard for me to think about what I'm -- if you're going to provide a CRT system to a patient, why wouldn't you use this? It's really -- there isn't a downside. The lead handling is excellent. You get all the flexibility. There's all the clinical data and support behind it. So eventually, we see this as really, it should become the majority of that CRT space overall. So we think we have the product and exclusivity to really go after the whole space. In terms of the impact on our other product or other product segments, I think with the Ellipse ICD coming, again, we'll have the most complete and most advanced portfolio of high-voltage products in the marketplace. And we'll be able to provide devices for patients. But for physicians and patients, it doesn't really matter about the characteristics. If they need the high output device, we have a device with 40 joules. If the patient is smaller and they want a smaller device, we'll be able to provide the Ellipse. If they want CRT, state-of-the-art functionality there. Longevity, our longevity is really unmatched with the products that we have. So I think, we feel like we're in a position that we can provide all of the tools and devices for all patients in this market.

Derrick Sung - Sanford C. Bernstein & Co., LLC., Research Division

And how much mix do expect to get from either Ellipse, as well as Quadra?

Eric Fain

Yes, we're not going to break out that level of detail.

Daniel J. Starks

Who's next? David, and then Bruce.

Bruce M. Nudell - Crédit Suisse AG, Research Division

Bruce Nudell from Credit Suisse. Dr. Chinitz and maybe Dan, like the last decade or 15 years has been spent figuring out where you are in endocardially and like are you contacting the wall and dealing with a moving target. Just how well do the guys, the surgeons do when they make the epicardial ablation where they can actually see where they are, assess contact under visualization? And just from your point of view, is there -- do you always need an endocardial component? And Dan, I think I remember way back when, when I first started covering the company, the vision was ultimately to have something under direct visualization, an epicardial kind of approach. Is that kind of like the Holy Grail as the way to go? Is that something that's never going to happen? Is that just technically just never give as good as a result as you could achieve endocardial?

Daniel J. Starks

Dr. Chinitz, what would you like to say?

Larry Chinitz

Well, A couple of things. One is the direct visualization of the surgical procedure is, to some degree, very helpful, but they have not achieved the ability to create transmurality despite that epicardial approach. And we study many, many patients now postoperatively that require additional work so -- and in some of the areas, a combined approach is very hopeful but they have not achieved that transmurality. The morbidity of the procedure has been prohibitive in some areas in terms of patients who desires for a more minimally-invasive procedure. And the final thing is this, our field is moving towards actually electrical data to improve efficacy. Surgeons can't map, and they're not capable of that kind of precision that we require. And especially as the cases get more complex, the absence of mapping is prohibitive.

Daniel J. Starks

Yes, and I don't have anything to add to that, Bruce.

David, yes.

David R. Lewis - Morgan Stanley, Research Division

David Lewis, Morgan Stanley. Actually, I was going to go with a related question, both for Dr. Chinitz and maybe Jane. I mean, Jane, unlike the majority of the presentation today, what we've seen is de novo technologies out of St. Jude, leap-frogging technologies across many segments of the business, but AF has always been technology which has been more iterative. There's multiple ways that the business is growing as the procedure gets better. I wonder if you could point us to the single technology amongst all of the things you've talked about, say, you think what would have the most impact in terms of accelerating growth for the AF business? and I guess for Dr. Chinitz, it's kind of a related question, which is you talked 10 years ago about lesion set. There still does not seem to be sort of that breakthrough technology that targets that lesion, I guess. Do you see that technology on the horizon? And for both of you, do we see a step function change in AF because there's been step function change in many other segments at St. Jude today but not necessarily AF?

Daniel J. Starks

Dr. Chinitz, what are your comments about the state of the field here in AF ablation?

Larry Chinitz

A lot of points to that question, but I do believe that the single most important technology to improve results and thereby continually to engage the community will be to create a durable lesion that limits the number of repeat procedures and results in increasing success. So what I think is over the last decade, the science has developed much more rapidly than has the technology to create what we need. So we understand much, much more, like Topera and other technologies that really give us insight into where we have to go. And so now we have to catch up with the technology to do that effectively. And I do think contact -- I mean irrigation has only been out for us for 2 or 3 years. I mean how recent is that, and how much -- how substantial of an improvement that was? So now combining irrigation with this feedback may allow us to obtain the results that will really engage the community.

Daniel J. Starks

And Dr. Chinitz and Dr. Corbisiero would be better educated on this than I am, and I'd appreciate any correction of my comments. But what I would say then, David, would be, from my perspective, even though we already have the $2.5 billion established markets for the EP catheter procedures, most of which are the biggest revenue, a percent of which are AF ablation, we're still in the early days of this in my -- from my perspective so -- and that's part of the excitement of it, that it's $2.5 billion today. It's still growing at a double-digit rate. The level of penetration is less than 5%. And so why isn't it more? And to me, there's just so many pieces of this that are yet to be determined, starting with the mechanisms of AF and your point about lesions, and which lesion set for which patients. There's plenty of controversy about that. There's plenty absolutely unknown about that. There's still a lot of this work is just empiric. And with the still-amazing lack of information about fundamental mechanisms of AF, these are symptoms that present the question of how many different diseases are there that we haven't put our fingers on and haven't defined that are presenting with the symptoms that we call AF. Those are all unanswered questions. And so there's a lot left to go for us to get to a $10 billion market, and I don't think there's any one thing that's going to do it. In our own portfolio, we do have clearly disruptive technology. The Mediguide technology is clearly disruptive technology. But I think, I expect to see us just continue to make a number of advances. You got a hint from Jane's discussion of the integrated cath lab. So the idea that -- so you can see where we're going. We're going so that this is St. Jude Medical, with a fully integrated ablation system that is increasingly less expensive, more efficacious and safer. And it's been -- it's like one cannot see from outside the company, the portrait being painted by all of these brush strokes that you now know about. So I mean when we bought ESI, when we bought EP MedSystems, when we bought IBI, all of these acquisitions were all part of the brush strokes to get to where we could have a fully integrated, simple cable-less or one cable system with the type of visibility on anatomic information for the physicians doing the procedure, that could only be wished for here in our prior time, and we're still not there yet. But you can see that with the EnSite one model and the combination of the additional accuracy of the Mediguide technology integrated into it, which is still an evolving process, and then add the possibility of all kinds of additional improvements to catheter control at the same time that we need to continue to just advance our knowledge on which lesion sets for which patients.

Larry Chinitz

Can I say one comment to that? Some of the confusion in terms of which lesion set and how do we treat it has been because we're not effectively delivering energy. I mean, so that we collect results on different populations with the assumption that when we did something, it was efficacious. But we never really knew, and that's really clouded our ability to say what is required. So just to reiterate, we almost have to start all over again now that we have better technology for that.

Jane J. Song

I wanted to add also that you may see that each segment, like the ablation catheter or the generator or Velocity, is incremental. But the fact that we can take all the information, okay, the actual design of a Cool Flex and the irrigation low-flow, and then get the information from the generator, and then display on Velocity, that's the ultimate integrated solutions. So that you have all your elements, you get all the information so that you give and display the information to a physician to make the best, you'll make, decision for the patient. And so we're just getting there. And for us to get there we'd have all these elements working well, and then basically once you have it, integrated it and then ultimately, optimize the solution.

Daniel J. Starks

Anybody holding the microphone there? Yes.

Glenn J. Novarro - RBC Capital Markets, LLC, Research Division

Glenn Novarro with RBC. Question for the docs and then a question for Eric. For the docs, on Unify Quadra and Quartet, should we assume that this is now your go-to device in CRT implants? Are you using this in every one of your cases? And if you're not, why aren't you using this in every one of your cases? And who's losing share in your lab? That's for the docs. And for Eric, your MRI pacemaker, going into U.S. clinicals this year, what's the trial design number of patients? And a follow-up, when do you think you'll get FDA approval and how is the device going to differ from the current Medtronic device?

Raffaele Corbisiero

Well, in terms of the Quad, I mean the lead handling is better than expected and the benefit is more than expected. So it should be considered the first-line lead to be used, especially with CRT-D. The main reason I don't use it is because I utilize a lot of CRT-P and it's not available with CRT-P yet, but I assume they'll take care of that pretty soon. But in terms of that sort of thinking, it's a first line. There's no downside to it that I've found yet, and I've been using it for several months. And I think that's echoed with my colleagues in Europe. It really isn't -- I mean, not to use it, I can think of reasons but none of them clinical.

Glenn J. Novarro - RBC Capital Markets, LLC, Research Division

And when you do use it, who's losing share in your lab?

Raffaele Corbisiero

Excuse me?

Glenn J. Novarro - RBC Capital Markets, LLC, Research Division

When you are using Unify and Quartet, is any one losing share? So you're not -- so you're giving up...

Daniel J. Starks

You don't have to answer that, Dr. Corbisiero. I mean, that is off the hook, the end of one. And you don't need to call out another company, but we're taking share from where it is available to be gotten. And one company has more of it, and the other company has some other good share that we want to and we're fully expecting to take share from both of them.

Glenn J. Novarro - RBC Capital Markets, LLC, Research Division

And Larry, what's the experience in your lab?

Larry Chinitz

Glenn, it's really not my area of expertise. I'd probably pass on that.

Glenn J. Novarro - RBC Capital Markets, LLC, Research Division

And then Eric, on the MRI pacemaker U.S. trial, anything you can give us in terms of size, follow-up, FDA approval? And how is the device going to differ from the current Medtronic device?

Eric Fain

So on the FDA trial, so we're still finalizing our discussions. So I would be sort of out-of-school -- talking out of school to give you anything there. But in terms of how the device compares, I think we're -- again, going back to Europe, we can just look at head-to-head when we're both on the market with our latest devices, and the feedback has been very positive. And we've been particularly targeting the clinical accounts that have a high interest in MRI pacemakers. That's not generally the case. But in particular centers that have a high interest in MRI and when we brought them our Accent MRI/Tendril MRI system, we've gotten very favorable reviews. And maybe I'd pass the need to comment anymore on that.

Daniel J. Starks

Denis, generally, with the competitiveness of our MRI pacer with -- versus the competition, what would you say?

Denis M. Gestin

I think, we should look at this other system as the leads again and the activator as well that is totally different from what is on the market today. And the early feedback we received from physicians were surprising positively by the lead. They were thinking the lead is going to be more difficult to handle compared to what they were used to with other companies. And I think the way we're using the lead from St. Jude, the Tendril MRI lead was perfect for them and not changing any of their, I'll say, way to implant the lead before. And the activator has been changing completely the way they were handling the patients as well and getting time and having more time for follow-up and being sure that the patients will go through the process very smoothly and the flow being able to be really doing a good job here.

Daniel J. Starks

Okay. Tao.

Tao Levy - Collins Stewart LLC, Research Division

Tao Levy from Collins Stewart. First question for the doctors on the LAA front. What are your thoughts on that opportunity once the product gets approved?

Daniel J. Starks

Dr. Chinitz, left atrial appendage occlusion, what do you think about that space generally? Any comments?

Larry Chinitz

Yes, I think it's really fascinating. The Watchman trials that were published in July of 2009 were extraordinarily positive in terms of non-inferiority to anticoagulation and in some areas, tended to superiority and mortality and stroke. So I do think that we have a technology that in many, many patients could be used as an adjunct to catheter ablation to give us greater comfort level and discontinuing anticoagulation. I think that the market has been hurt by all of the new anticoagulants that have come out that allow people to have an alternative to warfarin, and I think that, that's going to slow the acceptance to some extent. But we've been very involved in that technology for many, many years, and we're extremely positive on it.

Tao Levy - Collins Stewart LLC, Research Division

And second question, maybe for Eric, about listening to the results with the GPO drama that was going on in the ICD market. Did that ever have a positive impact on your share of your business?

Daniel J. Starks

Sorry, Tao, can you just repeat that?

Tao Levy - Collins Stewart LLC, Research Division

The GPO issues that surfaced around...

Daniel J. Starks

Let me ask Mike Rousseau to talk a little bit. Now on the -- so the question was GPO drama, and I would just want to point out, we didn't have any drama so -- but what we do have is we have a good program to partner with GPOs, and we have a successful program that's an integral part of our overall approach to satisfying the needs of our customers. But Mike Rousseau would be closest to it. Mike, what would you say what our GPO program?

Michael T. Rousseau

Well, I agree with the fact that we never really saw it as unfolding as drama as much as a challenge in dealing with another type of channel or managing a system. We have organized and have created the capability to bring all of our products to the GPO and/or to an IDN or another purchasing system in a very creative way. And I think that early on, when we organized and brought USD, that was really the initial power behind that decision organizationally. And so we have developed excellent relationships and partnerships across the board. And at this point, I can't think of any contract that we do not have in place or relationship that we do not have in place on a national level.

Tao Levy - Collins Stewart LLC, Research Division

Great. And then just lastly, can you talk a little bit about the unpredictability of the FDA? And obviously, that hurt you last year a little bit in terms of timeline. There's the new fees that the MedTech industry is going to be paying the FDA, greater fees than they were -- than they currently are. Is that supposed to help with the predictability? Is that impacting your thinking on any given timeline?

Daniel J. Starks

It's too soon to say. It's too soon to say. We fully support and think it is good public policy for FDA to be completely staffed with the number of reviewers that it needs to have a timely completion of all of its statutory obligations for 5, 10-K submissions and for all of its other approval responsibilities. So the idea that we would expect any agency to meet those obligations when it had inadequate funding to be appropriately staffed to meet those responsibilities is a non-starter. So the idea that additional resources are appropriate and the idea that a path has been laid now for additional resources to come to FDA, to put more of the right expertise in place, and have a scorecard and a publicly visible scorecard to monitor the progress that FDA makes in meeting its own statutory responsibilities, we think, is a very good thing. But it's too soon to say how well -- with the funding has to happen, the staffing needs to be implemented that needs to be then -- the execution is always a big unknown once the general concept has been agreed upon. And so it's too early for us to say, but it's an encouraging development.

Well, somebody -- now where's the microphone? Any one have it?

Joanne K. Wuensch - BMO Capital Markets U.S.

Joanne Wuensch from BMO. The device you talked about, the Nanostim, the leadless pacemaker, you said you were marketing or developing specifically for emerging markets. What is the timeline on that? And what I'm trying to understand is not just what type of features this product will have and when we'll it contribute to revenue, but how do you think about developing a product and getting it to market, in the emerging markets? And does that timeline differ than when you try to create something for Japan, Europe or the U.S.?

Daniel J. Starks

Eric, you opened up that can of worms. So now maybe you can address it.

Eric Fain

Sure. So maybe just to clarify what I said in the presentation, we looked at the leadless pacing and that particular device is not being exclusively tailored for emerging markets. We look at it as a device that has a particular opportunity in those markets based on the fact that there is a general under-penetration of pacing. It's a simple implant procedure that can be done by an eventual cardiologist than -- or like a physiologist but not necessarily people who are trained in making a device pocket and dealing with all of the other complexities with doing a leaded implant. So while we see that as the -- where it can have the most impact, it's a VVIR pacemaker. So if you think about the size of the VVIR market, let's say, in the United States, it's relatively small. It's bigger in Europe. And I think that the development of this technology may surprise us in terms of where that goes, especially if you think about, for example, an elderly population that needs basic pacing support, where you want to avoid potential for any complications that have to do with pockets and hematomas and infections and all the like, and you would expect would not need another device replacement sort of at that stage of life that, that would be an opportunity, I think, for this as well. So I think while it's particularly well-suited for developing markets, that it's going to have a place in all the marketplaces, developing or not.

Daniel J. Starks

And on your question on timeline, Joanne, we're going to stonewall you just that we'll stick to timelines for 2012. And we offer these teasers a little bit in an effort to strike the right balance for things that are more future-oriented, but that's a more future-oriented device.

And now who's next? Maybe you right there, and then we can come up to the front.

Sara Michelmore - Brean Murray, Carret & Co., LLC, Research Division

Sara Michelmore from Brean. I'll direct this at Mike but, Dan, you may wish to comment as well. Talking to EPs last year, they were grateful that ablation volumes were growing. And I think one of the interesting things that I picked up on, I know one account in particular that would have identified themselves as a ICD customer of a competitor of yours. I saw them gradually shift over the course of the year, and they would now identify themselves as a St. Jude customer. And part of it was they just saw your guys more and the sales and service. And it was somewhat related to, I think, the AF volume that they were doing as well. It was clearly something that kind of, I think, in that particular situation was a benefit to the amount of volume you were -- or share you were doing on the ICD side. So you may have talked about gaining share in that market, never been something that I've heard you call out specifically, but I was wondering if you can comment on that relationship.

Michael T. Rousseau

Yes. You're getting right at the core with one of our key strategies, and that is the fact that our service organization is developing the capability over the last 3 years, now into our fourth year, of a integrated technician. So our technicians have the ability to go in and perform or service a CRE -- a CRM case or a CRT-D case, and then seamlessly move and do an AF case. And that builds a tremendous amount of loyalty within an account. It also builds a tremendous amount of credibility within an account. So I think the integrated tech, or what we call an EP TSS, has made a significant difference in how we have grown share in accounts where we currently have share. And so that's where difference in service is. It's unique to St. Jude at this point, and we'll continue to exercise that. The other point is, again, I think the best talent is moving to St. Jude Medical in the field. And as we improve and increase our talent in the field, we're seeing the result of taking what I would think most reps objectively would call the most complete bag in the industry and growing our share across the board.

Daniel J. Starks

And then right in front. And then I'm hoping we might be in a position to adjourn in 3 minutes.

Unknown Analyst

My question is just in terms of just the behavioral changes. I guess, this should be more for the docs, but with some of the noise out there about cases and everything else, is it -- maybe you could talk a little bit about the process before doing a case. Have things changed in terms of what you need to now document? Just trying to figure out in terms of what's changed in terms of the process, just with some of the noise in the market place?

Daniel J. Starks

So Dr. Corbisiero on the device side, on your device implanting practice in your institution, maybe you could comment on what's changed in the last 12 months or 18 months with respect to just the habits?

Raffaele Corbisiero

I gather you're discussing more in terms of guidelines and how they should be followed and recent criticisms in that regard, and most of those criticisms mainly had to do with timing and documentation. And so what we've done at our place is institute the utilization review within our EP service. And what it's come down to is really documentation. And if you can document a chart, you can get most of the things passed through whatever organization that you're working with, CMS or otherwise. And that's really the key, that we're much more cognizant of what we're writing in the chart and why we might be deviating from a guideline and understanding that a guideline is just a guideline and we still have to take care of patients.

Daniel J. Starks

And Dr. Chinitz, in your arrhythmia service, what changes have you observed or managed and directed over the last 18 months or so?

Larry Chinitz

Well, I would certainly agree with the comments made in terms of the device side and the need for documentation. But I have to say that we are also have been forced by these new regulations to relook at how we do certain things, mostly in terms of in-patients and outpatients and selection biases that come in. And we have changed in terms of our AF ablation are now all outpatients. We are moving towards an outpatient implantation for pacemakers and defibrillators, except in very high-risk patients, and then that has to be documented. So there has been and is an ongoing change in that area.

Daniel J. Starks

So we'd like to thank everybody for joining us. We hope that we've made it worth your while. And with that, we'll adjourn this year's investor conference. Thank you.

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