St. Jude Medical, Inc. develops, manufactures and distributes cardiovascular medical devices for the global cardiac rhythm management, cardiology and cardiac surgery and atrial fibrillation therapy areas and neurostimulation medical devices for the management of chronic pain. Our four operating segments are Cardiac Rhythm Management (CRM), Cardiovascular (CV), Atrial Fibrillation (AF) and Neuromodulation (NMD). Our CV operating segment focuses on both the cardiology and cardiac surgery therapy areas. Our principal products in each operating segment are as follows: CRM –tachycardia implantable cardioverter defibrillator systems (ICDs) and bradycardia pacemaker systems (pacemakers); CV – vascular closure devices, heart valve replacement and repair products and pressure measurement guidewires; AF – electrophysiology (EP) introducers and catheters, advanced cardiac mapping, navigation and recording systems and ablation systems; and NMD – neurostimulation devices. References to “St. Jude Medical,” “St. Jude,” “the Company,” “we,” “us,” and “our” are to St. Jude Medical, Inc. and its subsidiaries.
We market and sell our products through both a direct sales force and independent distributors. The principal geographic markets for our products are the United States, Europe, Japan and Asia Pacific. St. Jude Medical was incorporated in Minnesota in 1976.
We aggregate our four operating segments into two reportable segments based primarily upon their similar operational and economic characteristics: CRM/NMD and CV/AF.
Cardiac Rhythm Management: CRM focuses on the research, development and manufacture of products for cardiac arrhythmias, or irregular heart beats. In 2009, we introduced multiple new products, including ICDs to provide life-saving therapy to patients suffering from lethal heart conditions, such as sudden cardiac arrest; cardiac resynchronization therapy (CRT) devices to save and improve the lives of heart failure (HF) patients; pacemakers to help people whose hearts beat too slowly or who suffer from other cardiac arrhythmias; and leads (wires that connect our devices to the heart) to carry electrical impulses to the heart and provide information to the device from the heart. CRM also develops and markets programmers and remote monitoring equipment that are used by physicians and healthcare professionals to program and analyze data from our devices for the management of their patients.
Our ICDs and cardiac resynchronization therapy defibrillator (CRT-D) devices treat patients with hearts that beat inappropriately fast, a condition known as tachycardia. ICDs monitor the heartbeat and deliver high energy electrical impulses, or “shocks,” to terminate ventricular tachycardia (VT) and ventricular fibrillation (VF). In VT, the lower chambers of the heart contract at an abnormally rapid rate and typically deliver less blood to the body’s tissues and organs. VT can progress to VF, in which the heart beats so rapidly and erratically that it can no longer pump blood. ICDs are typically implanted pectorally, below the collarbone, and connected to the heart by leads.
In 2009, we received approval (U.S. Food and Drug Administration (FDA) approval in January 2009 and European CE Mark approval in August 2009) of our SJ4 connector system that allows a single defibrillation lead connection between an ICD or CRT-D device and the leads that send electrical impulses to the heart. The SJ4 connector system, which includes the Durata® SJ4 defibrillation lead and the Current® ICD or Promote® CRT-D families, reduces the procedure time and volume of leads implanted in the chest cavity.
Our Current Accel™, Promote Accel™, and AnalyST Accel™ devices (European CE Mark approval in March 2009) are designed to adjust settings automatically to further enhance patient safety and minimize scheduled patient follow-ups. In addition, the AnalyST Accel™ devices represent our second generation ICD devices capable of continuously monitoring the electrical charges between heartbeats, providing physicians insight into clinical events to help improve patient management.
Our Current Plus™ and Promote Plus™ devices (FDA approval in February 2009) include several new features that provide physicians more options for customizing therapy for patients with potentially lethal heart arrhythmias and heart failure. In addition, our product portfolio includes the Current™ RF (radio frequency) VR/DR (single chamber/dual chamber) ICDs and Promote™ RF CRT-D (FDA approval in November 2007). These devices are available in both standard and high energy versions and feature wireless telemetry. Other ICD offerings include the Epic® II+ DR (FDA approval in March 2006) and high energy Atlas® II+ DR and Atlas® II VR/DR ICDs (FDA approval in July 2006) that offer our vibratory patient alert feature designed for greater patient safety and enhanced telemetry speeds to facilitate faster patient follow-ups. Other CRT-D product offerings include the Epic® II HF (FDA approval in March 2006) and high energy Atlas® II HF CRT-Ds (FDA approval in July 2006), which both contain the same unique patient vibratory alert and enhanced telemetry technology found in our Atlas® II VR/DR family of ICDs.
The St. Jude Medical QuickOpt™ Timing Cycle Optimization technology (FDA approval in July 2006) provides for automatic optimized ventricle to ventricle (V-V) and atria to ventricle (A-V) timing in all St. Jude Medical CRT-Ds and dual-chamber ICDs.
Our ICDs are used with the single- and dual-shock electrode transvenous defibrillation leads. Our latest ICD lead offerings include the Durata™ SJ4 (FDA approval in April 2009) and Durata™ high voltage lead (FDA approval in January 2008), which features a soft silicone tip and curved right-ventricular (RV) coil designed to further improve implant performance. The Durata™ leads, along with the Riata® ST Optim™ leads (FDA approval in July 2006), are small-diameter ICD leads and feature our exclusive Optim™ insulation material that combines the durability of polyurethane and the softness of silicone. Optim™ insulation material was designed specifically for high- and low-voltage cardiac pacing leads. The Riata® leads are an advanced family of small-diameter, steroid-eluting, active or passive fixation defibrillation leads. The Riata® integrated bipolar single- and dual-shock leads were FDA approved and launched in April 2004 and received European CE Mark approval in May 2004.
Our QuickSite® Bipolar Model 1056T LV (left ventricle) lead was launched in Europe in December 2004 and in the United States in mid-2005. In December 2007, we released the QuickFlex™ family of LV leads in the United States and Europe. We received European CE Mark approval in September 2008 for our QuickFlex µ (micro) LV lead. Additionally, we received European CE Mark approval in April 2009 for our CPS Aim® SL slittable inner catheter subselector, designed to offer safer, more efficient implantation procedures and therapy delivery for patients with heart failure. We also provide additional tools for placement of LV leads that include the CPS Direct™, CPS Aim™, CPS Luminary™, CPS Duo™, CPS Courier™ guidewires, and the CPS Venture™ wire control catheter.
Our pacemakers treat patients with hearts that beat too slowly, a condition known as bradycardia. Similar to ICDs, pacemakers are typically implanted pectorally, monitor the heart’s rate and, when necessary, deliver low-voltage electrical impulses that stimulate an appropriate heartbeat. Single-chamber pacemakers sense and stimulate only one chamber of the heart (atrium or ventricle), while dual-chamber devices can sense and pace in both the upper atrium and lower ventricle chambers. Biventricular pacemakers can sense and pace in three chambers (atrium and both ventricle chambers).
In 2009, we received approval (European CE Mark approval in April 2009 and FDA approval in July 2009) of our Accent™ RF pacemaker and Anthem™ RF CRT-P (cardiac resynchronization therapy pacemaker). The Accent™ and Anthem™ product family features RF telemetry that enables secure, wireless communication between the implanted device and the programmer used by the clinician, utilizing wireless telemetry from implant through follow-up, allowing for more efficient and convenient care and device management.
Our other pacing products include the Zephyr™ family of pacemakers, Victory® product line as well as Team ADx® pacemakers, a group comprised of the Identity® ADx, Integrity® ADx and Verity™ ADx families of devices.
The Zephyr™ family of pacemakers (FDA approval in May 2007) includes automaticity features to simplify device follow-up. All standard follow-up tests may be done automatically by the device. The Zephyr™ family of pacemakers includes functionality to reduce unnecessary ventricular pacing.
The Victory® line (FDA approval in December 2005), which includes the Victory® and Victory® XL family models, provide the enhancements of previous St. Jude Medical families while adding new capabilities. New capabilities include automatic P-wave and R-wave measurements with trends, lead monitoring and automatic polarity switch, follow-up electrograms, Ventricular Intrinsic Preference (VIPTM) to reduce right ventricle pacing and a ventricular rate during automatic mode switch histogram.
The Identity® DR and Identity® XL DR devices were approved by the FDA in November 2001, with the rest of the Team ADx™ devices receiving FDA approval in May 2003. The Team ADx devices received European CE Mark approval in August 2003. The Identity® ADx family models maintain the therapeutic features of previous St. Jude Medical pacemakers, including the AF Suppression™ algorithm and the Beat-by-Beat™ AutoCapture™ Pacing System. This family offers atrial tachycardia and atrial fibrillation arrhythmia diagnostics. These features are designed to help physicians better manage pacemaker patients suffering from atrial fibrillation— the world’s most common cardiac arrhythmia. We also offer the Microny® II SR+ and Microny® K. These small-sized pacemakers are available worldwide. Another pacemaker, the Regency®, is offered outside of the United States.
All of our available pacemaker families offer the unique Beat-by-Beat™ AutoCapture™ Pacing System. The AutoCapture™ Pacing System enables the pacemaker to monitor every paced beat to verify that the heart has been stimulated (known as capture), delivers a back-up pulse in the event of noncapture, continuously measures threshold (the amount of voltage necessary to stimulate the heart muscle), and makes adjustments in energy output to match changing patient needs. In addition, the Identity® ADx, Integrity® ADx and Identity® pacemakers include the St. Jude Medical AF Suppression™ Algorithm.
Our current pacing leads include the Optisense™ Optim, Optisense™, Tendril® STS, Tendril® ST Optim, Tendril ST, and Tendril® SDX (models 1688, 1488, 1788 and 1782) lead families and the IsoFlex® Optim, IsoFlex® S, IsoFlex P and Passive Plus® DX passive-fixation lead families, all available worldwide. All of these lead families feature steroid elution, which helps suppress the body’s inflammatory response to a foreign object. Our Optisense™ leads offer an electrode spacing technology that has been clinically proven to significantly reduce far-field over-sensing and inappropriate mode switching.
Our CRM devices interact with an external device referred to as a programmer. A programmer has two general functions. First, a programmer is used at the time of implant to establish the initial therapeutic settings of these devices as determined by the physician. A programmer is also used for follow-up patient visits, which usually occur every three to twelve months based on patient need, to download stored diagnostic information from the implanted device for physicians to verify appropriate therapeutic settings. Since the introduction of programmable pacemakers, all pacemaker manufacturers, including St. Jude Medical, have retained title to their programmers, which are used by their field sales force or by physicians and nurses or technicians.
In April 2006, we received FDA approval for the first software module of our Merlin™ Patient Care System, a universal programmer for St. Jude Medical ICDs and pacemakers. This completely redesigned programmer has a larger display, builtin full-size printer, touch screen and advanced new user interface. The programmer is a result of detailed customer research activities to optimize ease of use and to set new standards for efficient and effective in-clinic follow-up. This programmer has had several software updates since release to extend capabilities and support new products and markets. In 2008, the programmer was updated to include Japanese and Mandarin Chinese language support.
The St. Jude Medical Model 3510 universal series pacemaker and ICD programmer is an easy-to-use programmer that supports our pacemakers and ICDs. The Model 3510 universal series programmer allows the physician to utilize the diagnostic and therapeutic capabilities of our pacemakers and ICDs.
In addition to the programmer, physicians can monitor implanted devices and patient status using the Merlin.netTM Patient Care Network. The latest version of this system (v4.0) was launched in the United States in November 2009. This system allows patients to use their home transmitters to send data stored in devices to an internet site for retrieval by their physician through standard analog or DSL telephone lines. Physicians can better manage their increased number of ICD and pacemaker patients by conducting remote follow-up sessions and using alerts of clinically important events, thereby increasing efficiency and reducing risks for the patient. Additionally, patient flexibility is enhanced by the reduction in the number of office visits required and the ability to have a physician quickly interrogate device data whenever symptoms warrant.
In 2008, we launched the Merlin@home line of RF transmitters (FDA approval in July 2008 and European CE Mark approval in September 2008). The RF technology enables daily monitoring and scheduled remote follow-ups to occur in the patient’s home without any required activity by the patient after the unit has been installed.
Cardiovascular: Our Cardiovascular Division focuses on both the cardiology and cardiac surgery therapy areas. We offer both mechanical and tissue replacement heart valves as well as heart valve repair products. Additionally, we offer specialized disposable interventional devices, including vascular closure devices, compression assist devices, percutaneous catheter introducers, diagnostic guidewires (including guidewires providing physiological lesion assessment) and temporary bipolar pacing catheters.
Heart valve replacement or repair may be necessary because the native heart valve has deteriorated due to congenital defects or disease. Heart valves facilitate blood flow from the chambers of the heart throughout the entire body. St. Jude Medical® mechanical heart valves have been implanted in over 1.8 million patients worldwide. The SJM Regent® mechanical heart valve was approved for sale in Europe in December 1999 and received FDA approval for U.S. market release in March 2002. We market both the Epic™ and Biocor® stented tissue heart valves. The Epic™ stented tissue valve is identical in design to the Biocor® stented tissue valve but also incorporates an anti-calcification treatment, designed to protect against tissue mineralization or hardening. In 2009, we successfully completed U.S. enrollment of our Trifecta™ stented tissue heart valve United States Investigational Device Exemption (IDE) clinical trial.
Annuloplasty rings are prosthetic devices used to repair diseased or damaged mitral heart valves. We offer a line of heart valve repair products, including the semi-rigid SJM® Séguin annuloplasty ring, the fully flexible SJM Tailor® annuloplasty ring and a St. Jude Medical® rigid saddle-shaped annuloplasty ring. In 2009, we launched the Attune® flexible annuloplasty ring, designed specifically for those physicians who prefer flexible rings for the treatment of ischemic heart disease and use the ring in conjunction with robotic or other minimally invasive surgical tools.
Our vascular closure devices are used to close radial and femoral artery puncture sites following percutaneous coronary interventions, diagnostic procedures and certain peripheral procedures. Active or passive (manual) compression is utilized to assist in closing artery puncture sites. Our active closure devices include our Angio-Seal™ product offering. Most recently, we launched the Angio-SealTM Evolution vascular closure system in the U.S. and most international geographies. In addition to the performance and ease of use benefits offered from prior versions of Angio-SealTM, Angio-SealTM Evolution features automated collagen compaction – thus making it easier for the clinician to ensure immediate arterial hemostasis and rapid deployment of the device. Prior versions of Angio-Seal™, Angio-SealTM VIP and Angio-SealTM STS Plus continue to generate revenue in our active closure product offering.
We estimate that manual compression is utilized in approximately two-thirds of all vascular closure cases. As a result of our 2008 Radi Medical Systems acquisition, we now have compression assist device product offerings, expanding our market presence and addressing the vascular closure preferences of all physicians. Our compression assist device offerings include both the RadiStop® and FemoStop® manual compression systems that arrest bleeding of the radial and femoral arteries, respectively. External compression devices are often used to maintain pressure on the arteriotomy in order to facilitate hemostasis.
In coronary disease diagnosis and intervention, an emerging treatment model involves the use of tools for physiologic lesion assessment rather than sole reliance on contrast-enhanced angiography. In this treatment model, blood flow through a stenotic coronary lesion is measured with a special purpose coronary guidewire containing a pressure sensor. We now market PressureWire® Certus, which provides precise measurements of intravascular pressure during a cardiovascular procedure and helps aid physicians in determining the most beneficial lesions to treat. At the October 2009 Transcatheter Cardiovascular Therapeutics conference, two-year results from the pivotal Fractional flow reserve versus Angiography in Multivessel Evaluation (FAME) study were presented which demonstrated continued reductions in mortality, morbidity, stent utilization and procedural cost when PressureWire® Certus was employed to guide the physician decision-making process. PressureWire® Certus has regulatory approval in Europe and Japan as well as FDA approval in the United States.
Percutaneous catheter introducers are used to create passageways for cardiovascular catheters from outside the human body through the skin into a vein, artery or other location inside the body. Our percutaneous catheter introducer portfolio consists primarily of peel-away and non peel-away sheaths, sheaths with and without hemostasis valves, dilators, guidewires, repositioning sleeves and needles. These products are offered in a variety of sizes and packaging configurations. Diagnostic guidewires, such as the GuideRight™ and HydroSteer™ guidewires, are used in conjunction with percutaneous catheter introducers to aid in the introduction of intravascular catheters. Our diagnostic guidewires are available in multiple lengths and incorporate a surface finish for lasting lubricity.
Our bipolar temporary pacing catheters are inserted percutaneously for temporary use (ranging from less than one hour to a maximum of one week) with external pacemakers to provide patient stabilization prior to implantation of a permanent pacemaker, following a heart attack or during surgical procedures. We produce and market several designs of bipolar temporary pacing catheters, including our Pacel™ pacing catheters, which are available in both torque control and flow-directed models with a broad range of curve choices and electrode spacing options.
Atrial Fibrillation: Atrial fibrillation is a rapid and inconsistent heart rhythm that occurs in the upper chambers of the heart. People suffering from atrial fibrillation may experience fatigue and shortness of breath, and atrial fibrillation has been shown to increase the risk of stroke. Atrial fibrillation and other irregular heart rhythms such as atrial flutter and Wolff-Parkinson-White Syndrome are often managed with medications that palliate the symptoms of the irregular heartbeat. We are committed to developing device-based ablation therapies for these conditions that offer the potential for a cure.
We provide a complete system of products – for access, diagnosis, visualization and ablation - that assist physicians in diagnosing and treating various irregular heart rhythms. Our products are designed to be used in the electrophysiology (EP) lab and cardiac surgery.
Our access products enable clinicians to facilitate the percutaneous delivery of diagnostic and ablation catheters to areas of the heart where arrhythmias occur. These products include, among others, our Swartz™ and Swartz™ Braided Transseptal fixed-curve introducers, which are designed to guide catheters to precise locations in the right and left atria. In addition, our Agilis™ NxT Steerable Introducer (FDA approval in July 2006) enables flexible mobility and stability of catheters in the heart while reducing the outside diameter of the introducer.
For diagnosing arrhythmias percutaneously, we offer a portfolio of fixed-curve and steerable catheters. Our Response™, Supreme™ and Inquiry™ fixed curve catheters gather electrical information from the heart that indicates what may be causing an arrhythmia and/or help locate its source. Our steerable product lines include Livewire™ and Reflexion™, which allow clinicians to move the catheter tip in precise movements in order to diagnose the more anatomically challenging areas within the heart. Our Reflexion™ Spiral (FDA approval in October 2006) and Inquiry™ Optima™ PLUS (FDA approval in March 2006) are circular mapping catheters that enable the physician to check for electrical isolation of the pulmonary vein openings during an AF ablation procedure. The Reflexion HD™ (FDA approval in January 2009) is a high-density, circular mapping catheter that is designed to leverage the mapping capabilities of the EnSite™ System to create accurate high-density geometries and detailed electrical maps. In addition, our EnSite Array™ non-contact mapping catheter works with the EnSite® System and EnSite Velocity™ System, enabling physicians to quickly map complex and unstable arrhythmias in a single heartbeat without touching the walls of the patient’s heart.
In 2008, we also entered the market for implantable cardiac monitors with the release of our Confirm™ device (FDA approval and CE Mark approval in September 2008). This small implantable device is designed to help physicians monitor for abnormal cardiac conditions.
In July 2008, we acquired EP MedSystems, Inc. (EP MedSystems), broadening our portfolio of diagnostic products with the addition of the EP–WorkMate® recording system and the ViewFlex® range of ultrasound products. The EP–WorkMate® recording system is used to monitor electrical activity of the heart via intracardiac catheters and features our new ClearWave technology for high fidelity signals and an integrated stimulator. The ultrasound product line consists of the ViewMate® II ultrasound console and the ViewFlex® PLUS ultrasound catheter. This ultrasound system provides intracardiac ultrasound imaging to help provide more detail about the cardiac anatomy and guide therapy delivery.
Our EnSite® System is a mapping and navigation system that, when used in conjunction with the EnSite® Array™ non-contact mapping catheter or EnSite NavX™ navigation and visualization technology, creates three-dimensional (3D) cardiac models, shows catheters moving within those models, and allows physicians to map and visualize electrical activity in the heart. In 2009, we introduced the EnSite Velocity™ System which provides a more streamlined workflow for the procedure and offers an intuitive user interface. There are also several important new capabilities in the EnSite Velocity™ System. The OneMap™ Tool helps create detailed chamber models more quickly with more information and the RealReview™ function allows the user to view live and pre-recorded cardiac models and electrical maps simultaneously. In 2008, we launched the EnSite® System Version 8.0 software platform, which enables the creation of cardiac models with a higher level of detail while also providing improved reproducibility as well as several new approaches to visually present arrhythmia patterns. In 2007, we launched the EnSite Fusion™ Registration Module, a software expansion module for our EnSite® System that registers the EnSite NavX™ 3D model to a segmented computed tomography (CT) image of cardiac anatomy, allowing for additional detailed levels of cardiac anatomy to be visualized and navigated within one image during an ablation procedure.
In December 2008, we acquired privately-held MediGuide, Inc. (MediGuide), a development-stage company that had been focused on developing its Medical Positioning System (gMPSTM) technology for localization and tracking capability for interventional medical devices. In 2009, we focused our development efforts on integrating the gMPSTM technology with our diagnostic and ablation catheters and our EnSite VelocityTM platform.
We offer two general ablation product lines which focus on disabling abnormal tissue that causes or perpetuates arrhythmias: ablation catheters, which are used as part of a percutaneous procedure and are designed to apply RF energy to the inside of the heart; and surgical cardiac ablation devices, which are used to ablate cardiac tissue from the epicardium (outside the heart).
Our standard non-irrigated tip ablation catheters include our Livewire™ TC Ablation Catheters uni- and bi-directional models that offer stability and excellent tissue contact with cardiac tissue. Our Safire™ (4mm and 5mm) and Safire TX (8mm) Bi-directional Ablation Catheter product line offers a comprehensive range of catheter tip sizes (4mm and 5mm catheter tips, FDA approval in August 2006, and 8mm catheter tip, FDA approval in October 2007) and curve configurations and is built on our ComfortGrip™ handle platform that is designed for physician comfort and control during EP procedures. Our Therapy™ 4mm and 8 mm tip standard catheter lines provide a range of curve options and temperature control. When used with our IBI-1500 series Cardiac Ablation Generators, power can be effectively managed for the creation of longer ablation lines. In addition to the standard (non-irrigated) tip ablation catheters, we also offer the open-irrigated tip Therapy Cool Path™ ablation catheter. The Therapy Cool Path™ catheter features holes at the tip of the catheter that allow infused saline to circulate around the tip during therapy delivery. The ability to infuse saline allows the tip to be cooled and lessens the potential for char or thrombus to form during ablation.
Our surgical cardiac ablation product line, the Epicor™ Cardiac Ablation System (Epicor™ System), creates cardiac ablation lesions by applying high intensity focused ultrasound (HIFU) to the outside of a beating heart without the need to put the patient on a heart-lung bypass machine. The primary components of the Epicor™ System include the Epicor™ Ablation Control System that generates and controls the ultrasound energy, the UltraCinch™ Ablation Device (FDA approval in May 2004) that creates circumferential lesions in cardiac tissue and the UltraWand™ Handheld Ablation Device (FDA approval in February 2004) that allows for additional linear lesions to be created.
Neuromodulation: The neuromodulation market has two main categories of treatment: neurostimulation, in which an implantable device delivers electrical current directly to targeted nerve sites, and implantable drug infusion systems, in which an implanted pump delivers drugs through a catheter directly to targeted nerve sites. All of our Neuromodulation product offerings provide neurostimulation treatment.
Neurostimulation for the treatment of chronic pain involves delivering low-level electrical impulses via an implanted device (sometimes referred to as a “pacemaker for pain”) directly to the spinal cord or peripheral nerves. This stimulation interferes with the transmission of pain signals to the brain and inhibits or blocks the sensation of pain felt by the patient. The patient’s sensation of pain is replaced with a sensation called paresthesia, which is often described as a tingling or massaging sensation. Neurostimulation for chronic pain is generally used to manage sharp, intense and constant pain arising from nerve damage or nervous system disorders. A neurostimulation system typically consists of four components: a pulse generator/receiver that produces the electric current and is implanted under the patient’s skin; leads that carry the electrical impulses to the targeted nerve sites; a patient remote that enables the patient to control their therapy within prescribed ranges, and a clinician programmer that is used to program the power supply with individualized therapy for the patient. Clinical results demonstrate that many patients who are implanted with a neurostimulation system experience a substantial reduction in pain, an increase in activity level, a reduction in use of narcotics and a reduction in hospitalization.
We offer a wide array of neurostimulation systems including rechargeable implantable pulse generators (IPGs), primary cell implantable pulse generators and RF powered systems. We currently market three neurostimulation product platforms worldwide: the Eon™ IPG family, which include rechargeable and primary cell battery models, Genesis™ primary cell IPG systems and Renew™ RF systems.
The Eon™ family of IPG’s includes the Eon™, Eon Mini™ and EonC™ IPG. The Eon™ rechargeable IPG is a 16-contact IPG with a high capacity battery. It offers a broad range of options to help the clinician maximize success in managing chronic pain. The Eon™ IPG provides enhanced longevity between recharges, allowing patients added flexibility in their recharging schedule. It is FDA approved to operate at least 24 hours between recharges for 10 years at high settings. The device is designed to provide consistent pain therapy.
The Eon Mini™ rechargeable 16-contact IPG’s small size offers the potential for alternative placement options, which helps clinicians treat a variety of patients. It is FDA-approved to operate at least 24 hours between recharges for 10 years at high settings – a long battery life for its small size. The Eon Mini IPG is well-suited for patients with smaller body mass and low to high power requirements.
The EonC™ primary cell IPG features a large-capacity battery and constant current pulse delivery for consistent, low-maintenance therapy. It is well-suited for patients with low to medium power requirements and those who prefer the simplicity of a non-rechargeable IPG.
The Genesis™ family of IPGs offer a high battery capacity-to-size ratio and flexibility in addressing diverse pain patterns. The GenesisXP™ IPG system offers a greater battery capacity, resulting in enhanced longevity and/or additional power to treat more complex pain. Conventional IPGs, such as Genesis™ and GenesisXP™, are well-suited for patients with relatively simple pain or modest power requirements and for patients who would have difficulty managing a rechargeable system or a RF system.
The Renew™ RF system features a small implanted RF receiver/pulse generator, leads and a transmitter containing a power source that is worn externally. The system is powered with the help of an antenna that is attached to the patient’s skin with a removable belt or an adhesive pad. As the Renew™ system has a rechargeable, external power source, we believe it is best suited for patients with complex, changing or multi-extremity pain patterns that require higher power levels for treatment when battery management, even with a rechargeable system, is problematic.
Each of our generator systems work with a corresponding patient remote. The remote controller enables the patient to control their therapy intensity and location with simple adjustments, enabling the patient to control their pain. The controllers work by wirelessly communicating to the implanted generator to adjust the patient’s stimulation parameters.
In combination with our wide array of generators, we market a broad variety of leads which are intended to give clinicians the flexibility to meet a range of patient needs. Our leads can be divided into two types: percutaneous and paddle leads. Our percutaneous leads consist of the 8-contact Octrode™ and 4-contact Quattrode™ lead designs. Our paddle lead offering consists of the Lamitrode™ family of leads. This family includes the Lamitrode™ 88 lead, which consists of single and dual column paddle leads that provide up to two vertebral segments of coverage; Tripole™ leads, which feature a three-column electrode array that is designed to focus stimulation more precisely for enhanced targeting of low back pain; S-Series™ leads, which feature a small profile that is intended to ease insertion, and an integrated stylet that is engineered to improve steering and control during implantation; and C-Series™ leads, shaped to mimic the curve of the epidural space of the spine and designed to facilitate lead placement and reduce lead migration. In 2009, we received FDA approval for our Penta™ paddle lead, a five column lead, designed to provide enhanced stimulation control and specificity for focused stimulation therapy.
Our systems are programmed with our Rapid Programmer™ platform. This system enables clinicians to efficiently test patients intra-operatively and program patients post-operatively. The Rapid Programmer™ is a palm-sized programmer that features a touch screen interface clinicians can navigate to create multiple programs customized for the patient. Using the foundation of our Dynamic MultiStim™ technology for real time adjustments of multiple pain areas simultaneously, we are now adding MultiSteering™. This new technology was released at the end of 2009 (FDA approval in 2009) and simplifies the programming of complex multi-focal pain by using an optimized current steering algorithm that is designed for more thorough and efficient programming sessions.
The neurostimulation market continues to develop. Deep brain stimulation (DBS) for motor disorders (e.g. Parkinson’s disease and essential tremor) continues to grow and potential new indications such as DBS for depression, obesity and occipital stimulation for migraine, continue to be investigated. In early 2009 we began a limited release in Europe of the Libra™ and LibraXP™ DBS systems for treating the symptoms of Parkinson’s disease, a neurological disorder that progressively diminishes a person’s control over his or her movements and speech. The Brio™ IPG, a small, long lasting rechargeable DBS device, and the Guardian™ burr hole cap were introduced to the European market for the treatment of Parkinson’s disease. These systems in Europe are our first approved products in the DBS market (CE mark approval in 2009). We have completed enrollment of the U.S. Parkinson’s Disease and Migraine Headache pivotal trials and continue to collect follow up data. Additionally, we continue to enroll patients in two other pivotal trials to investigate the safety and efficacy of the Libra™ DBS system for essential tremor and depression in patients for whom current available treatments are not effective. The BROADEN™ (BROdmann Area 25 Deep brain Neuromodulation) depression study is currently enrolling at a limited number of sites. Other potential indications are in various stages of evaluation, regulatory review and trial.
The medical device market is intensely competitive and characterized by extensive research and development and rapid technological change. In addition, competitors have historically employed litigation to gain a competitive advantage. Our competitors range from small start-up companies to larger companies that have significantly greater resources and broader product offerings, and we anticipate that in the coming years, other large companies will enter certain markets in which we currently hold a strong position. We expect competition will continue to intensify with the increased use of strategies such as consigned inventory and reduced pricing.
Our customers consider many factors when choosing suppliers, including product reliability, clinical outcomes, product availability, inventory consignment, price and product services provided by the manufacturer. As a result, market share can shift due to technological innovation, product field actions and safety alerts as well as from other business factors.
We are one of the three principal manufacturers and suppliers in the global CRM market. Our primary competitors in this market are Medtronic, Inc. (Medtronic) and Boston Scientific Corporation (Boston Scientific). These two competitors are larger than us and have invested substantial amounts in CRM research and development (R&D). These markets are highly competitive and rapid technological change is expected to continue, requiring us to invest heavily in R&D and to effectively market our products.
The cardiovascular market is also highly competitive with numerous competitors. The majority of our sales are generated from our vascular closure devices and heart valve replacement and repair products. We continue to hold the number one market position in the vascular closure device market; however, the market for vascular closure devices is highly competitive and there are several companies in addition to St. Jude Medical that manufacture and market these products worldwide. Our primary vascular closure device competitor is Abbott Laboratories. Additionally, we anticipate other large companies will enter this market in the coming years, which will increase competition. The cardiovascular market also includes cardiac surgery products such as mechanical heart valves, tissue heart valves and valve repair products, which are also highly competitive. We are the world’s leading manufacturer and supplier in the mechanical heart valve market. Our principal competitors in the mechanical heart valve market are Sorin CarboMedics, ATS Medical, Inc. and several smaller manufacturers. In the tissue heart valve market, we compete against two principal tissue heart valve manufacturers – Edwards Lifesciences Corporation (Edwards Lifesciences) and Medtronic – as well as many other smaller manufacturers. Cardiac surgery therapies continue to shift from mechanical heart valves to tissue valves and repair products. Other competitors such as Edwards Lifesciences manufacture transcatheter heart valves that are marketed to patients who may be too frail for traditional heart valve surgery.
The atrial fibrillation therapy area is broadening to include multiple therapy methods and treatments which include drugs, percutaneous delivery of diagnostic and ablation catheters, external electrical cardioversion and defibrillation, implantable defibrillators and open-heart surgery. As a result, we have numerous competitors in the emerging atrial fibrillation market. Larger competitors, such as Medtronic, have started to extend their presence in the atrial fibrillation market through acquisitions or by leveraging their cardiac rhythm management capabilities. Our primary competitors include Biosense Webster, a division of Johnson & Johnson, Inc., C.R. Bard, Inc. and Boston Scientific.
The neuromodulation market is one of medical technology’s fastest growing segments. We are one of three principal manufacturers of neurostimulation devices. Competitive pressures will increase in the future as our primary competitors, Medtronic and Boston Scientific, attempt to secure and grow their positions in the neuromodulation market. Although we also compete against smaller competitors like Cyberonics, Inc., barriers to entry for new competitors are high, due to a long and expensive product development and regulatory approval process as well as the intellectual property and patent positions existing in the market. However, other larger medical device companies may be able to enter the neuromodulation market by leveraging their existing medical device capabilities, thereby decreasing the time and resources required to enter the market.
Patents, Licenses and Trademarks
Our policy is to protect our intellectual property rights related to our medical devices. Where appropriate, we apply for U.S. and foreign patents. We own or hold licenses to numerous U.S. and foreign patents. U.S. patents are typically granted for a term of twenty years from the date a patent application is filed. The actual protection afforded by a foreign patent, which can vary from country to country, depends upon the type of patent, the scope of its coverage and the availability of legal remedies in the country. In those instances where we have acquired technology from third parties, we have sought to obtain rights of ownership to the technology through the acquisition of underlying patents or licenses.
We also have obtained certain trademarks and tradenames for our products to distinguish our products from our competitors’ products. U.S. trademark registrations are for a term of ten years and are renewable every ten years as long as the trademarks are used in the regular course of trade. We register our trademarks in the U.S. and in a number of countries where we do business.
While we believe design, development, regulatory and marketing aspects of the medical device business represent the principal barriers to entry, we also recognize that our patents and license rights may make it more difficult for competitors to market products similar to those we produce. We can give no assurance that any of our patent rights, whether issued, subject to license, or in process, will not be circumvented or invalidated. Furthermore, there are numerous existing and pending patents on medical products and biomaterials. There can be no assurance that our existing or planned products do not or will not infringe such rights or that others will not claim such infringement. No assurance can be given that we will be able to prevent competitors from challenging our patents or entering markets we currently serve.
Research and Development
We are focused on the development of new products and on improvements to existing products. R&D expense reflects the cost of these activities, as well as the costs to obtain regulatory approvals of certain new products and processes and to maintain the highest quality standards with respect to our existing products. Our R&D expenses were $559.8 million (12.0% of net sales) in 2009, $531.8 million (12.2% of net sales) in 2008 and $476.3 million (12.6% of net sales) in 2007. Although our R&D expenses have decreased as a percent of net sales in recent years, total R&D expense continues to increase each year, reflecting our continuing commitment to fund future long-term growth opportunities. We also recognized $5.8 million and $319.4 million of purchased in-process research and development expense in 2009 and 2008, respectively, in connection with the purchase of certain intellectual property assets in 2009 and acquisitions completed in 2008.
In addition to generating growth internally through our own R&D activities, we also make strategic acquisitions and investments to access new technologies and therapy areas. We expect to continue to make acquisitions and investments in future periods to strengthen our business.
On July 3, 2008, we completed the acquisition of EP MedSystems for $95.7 million (consisting of $59.0 million in net cash consideration and direct acquisition costs and 0.9 million shares of St. Jude Medical common stock). EP MedSystems had been publicly traded on the NASDAQ Capital Market under the ticker symbol EPMD. EP MedSystems is based in West Berlin, New Jersey and develops, manufactures and markets medical devices for the electrophysiology market which are used for visualization, diagnosis and treatment of heart rhythm disorders. We acquired EP MedSystems to strengthen our portfolio of products used to treat heart rhythm disorders. EP MedSystems has become part of our Atrial Fibrillation division.
On December 19, 2008, we completed the acquisition of Radi Medical Systems for $248.9 million in net cash consideration, including direct acquisition costs. Radi Medical Systems is based in Uppsala, Sweden and develops, manufactures and markets products that provide precise measurements of intravascular pressure during a cardiovascular procedure and manual compression systems that arrest bleeding of the femoral and radial arteries following an intravascular medical device procedure. We acquired Radi Medical Systems to accelerate our cardiovascular growth platform in these two segments of the cardiovascular medical device market in which we previously had not participated. Radi Medical Systems has become part of our Cardiovascular division.
On December 22, 2008, we completed the acquisition of MediGuide for $285.2 million in net consideration. MediGuide was a development-stage company based in Haifa, Israeli and has been focused on developing its Medical Positioning System (gMPSTM) technology for localization and tracking capability for interventional medical devices. We plan to expend additional R&D efforts to achieve technological feasibility for this technology. MediGuide has become part of our Atrial Fibrillation division.
Marketing and Distribution
Our products are sold in more than 100 countries throughout the world. No distributor organization or single customer accounted for more than 10% of 2009, 2008 or 2007 consolidated net sales.
In the United States, we sell directly to healthcare providers primarily through a direct sales force. In Europe, we have direct sales organizations selling in 23 countries. In Japan, we sell directly to healthcare providers through a direct sales force and we also continue to use longstanding independent distributor relationships. In Asia Pacific, we have direct sales organizations selling in seven countries, and we also utilize independent distributors. Throughout the rest of the world, we use a combination of independent distributors and direct sales forces.
Group purchasing organizations (GPO), independent delivery networks (IDN) and large single accounts such as the Veterans Administration in the United States continue to consolidate purchasing decisions for some of our healthcare provider customers. We have contracts in place with many of these organizations. In some circumstances, our inability to obtain a contract with a GPO or IDN could adversely affect our efforts to sell products to a particular healthcare provider.
Our net sales and long-lived assets by significant geographic areas are presented in Note 14 of the Consolidated Financial Statements in the Financial Report included in St. Jude Medical’s 2009 Annual Report to Shareholders and filed as Exhibit 13 to this Form 10-K.
Our international business is subject to special risks such as: foreign currency exchange controls and fluctuations; the imposition of or increase in import or export duties, surtaxes, tariffs or customs duties; the imposition of import or export quotas or other trade restrictions; foreign tax laws and increased costs associated with overlapping tax structures; longer accounts receivable cycles; and other international regulatory, economic, legal and political problems. Such risks are further described in Item 1A, Risk Factors of this Form 10-K. Currency exchange rate fluctuations relative to the U.S. Dollar can affect reported consolidated net sales and net earnings. See the Market Risk section of Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 13 of the Consolidated Financial Statements in the Financial Report included in St. Jude Medical’s 2009 Annual Report to Shareholders and filed as Exhibit 13 to this Form 10-K.
Our quarterly net sales are influenced by many factors, including new product introductions, acquisitions, regulatory approvals, patient and physician holiday schedules and other factors. Net sales in the third quarter are typically lower than other quarters of the year as a result of patient tendencies to defer, if possible, procedures during the summer months and from the seasonality of the U.S. and European markets, where summer vacation schedules normally result in fewer procedures.
We purchase raw materials and other products from numerous suppliers. Our manufacturing requirements comply with the rules and regulations of the FDA and comparable agencies in foreign countries, which mandate validation of materials prior to use in our products. We purchase certain supplies used in our manufacturing processes from single sources due to quality considerations, costs or constraints resulting from regulatory requirements. Agreements with certain suppliers are terminable by either party upon short notice and we have been advised periodically by some suppliers that in an effort to reduce their potential product liability exposure, they may terminate sales of products to customers that manufacture implantable medical devices. While some of these suppliers have modified their positions and have indicated a willingness to continue to provide a product temporarily until an alternative vendor or product can be qualified (or even to reconsider the supply relationship), where a particular single-source supply relationship is terminated, we may not be able to establish additional or replacement suppliers for certain components or materials quickly. A reduction or interruption by a sole-source supplier of the supply of materials or key components used in the manufacturing of our products or an increase in the price of those materials or components could adversely affect our business, financial condition and results of operations.
Our products, development activities and manufacturing processes are subject to extensive and rigorous regulation by the FDA pursuant to the Federal Food, Drug, and Cosmetic Act (FDCA), by comparable agencies in foreign countries and by other regulatory agencies and governing bodies. Under the FDCA and associated regulations, manufacturers of medical devices must comply with certain regulations that cover the composition, labeling, testing, clinical study, manufacturing, packaging and distribution of medical devices. Medical devices must receive FDA clearance or approval before they can be commercially marketed in the United States. The most comprehensive level of approval requires the completion of an FDA-approved clinical evaluation program and submission and approval of a pre-market approval (PMA) application before a device may be commercially marketed. Our vascular closure devices, mechanical and tissue heart valves, ICDs, pacemakers and certain leads, neurostimulation devices and EP catheter applications require a PMA application or supplement to a PMA. Other leads and lead delivery tools, annuloplasty ring products, other neurostimulation devices and other EP and cardiology products are currently marketed under the less rigorous 510(k) pre-market notification procedure of the FDCA.
Furthermore, our international business is subject to medical device laws in individual countries outside the United States. Most major markets for medical devices outside the United States require clearance, approval or compliance with certain standards before a product can be commercially marketed. The applicable laws range from extensive device approval requirements in some countries for all or some of our products, to requests for data or certifications in other countries. Generally, international regulatory requirements are increasing. In the European Union, the regulatory systems have been consolidated, and approval to market in all European Union countries (represented by the CE Mark) can be obtained through one agency. The process of obtaining marketing clearance from the FDA and foreign regulatory agencies for new products or with respect to enhancements or modifications to existing products can take a significant period of time, require the expenditure of substantial resources, involve rigorous pre-clinical and clinical testing, require changes to the products and result in limitations on the indicated uses of the products.
The FDA conducts inspections prior to approval of a PMA application to determine compliance with the quality system regulations that cover manufacturing and design. In addition, the FDA may require testing and surveillance programs to monitor the effects of approved products that have been commercialized, and may prevent or limit further marketing of products based on the results of these post-marketing programs. At any time after approval of a product, the FDA may conduct periodic inspections to determine compliance with both the FDA’s Quality System Regulation (QSR) requirements and/or current medical device reporting regulations. Product approvals by the FDA can be withdrawn due to failure to comply with regulatory standards or the occurrence of unforeseen problems following initial approval. The failure to comply with regulatory standards or the discovery of previously unknown problems with a product or manufacturer could result in fines, delays or suspensions of regulatory clearances, seizures or recalls of products (with the attendant expenses), the banning of a particular device, an order to replace or refund the cost of any device previously manufactured or distributed, operating restrictions and criminal prosecution, as well as decreased sales as a result of negative publicity and product liability claims.
We are required to register with the FDA as a device manufacturer and as a result, we are subject to periodic inspection by the FDA for compliance with the FDA’s QSR requirements, which require manufacturers of medical devices to adhere to certain regulations, including testing, quality control and documentation procedures. In addition, the federal Medical Device Reporting regulations require us to provide information to the FDA whenever there is evidence that reasonably suggests that a device may have caused or contributed to a death or serious injury or, if a malfunction were to occur, could cause or contribute to a death or serious injury. Compliance with applicable regulatory requirements is subject to continual review and is rigorously monitored through periodic inspections by the FDA. In the European Community, we are required to maintain certain International Organization for Standardization (ISO) certifications in order to sell products, and we undergo periodic inspections by notified bodies to obtain and maintain these certifications.
The FDA also regulates recordkeeping for medical devices and reviews hospital and manufacturers’ required reports of adverse experiences to identify potential problems with FDA-authorized devices. Regulatory actions may be taken by the FDA due to adverse experience reports.
Diagnostic-related group (DRG) and Ambulatory Patient Classification (APC) reimbursement schedules dictate the amount that the U.S. government, through the Centers for Medicare and Medicaid Services (CMS), will reimburse hospitals for care of persons covered by Medicare. In response to rising Medicare and Medicaid costs, from time to time Congress and state legislatures consider legislation that would restrict funding for these programs. Changes in current DRG and APC reimbursement levels could have an adverse effect on market demand and our domestic pricing flexibility. In the U.S., Medicare payment to providers is based on prospectively set rates. CMS, which administers the Medicare and Medicaid programs, uses separate Prospective Payment Systems for reimbursement to acute inpatient hospitals, hospital outpatient departments and ambulatory surgery centers. In response to rising Medicare costs, from time to time Congress considers proposals that would reduce the annual update in federal payments to hospitals. Reduced funding could have an adverse effect on market demand and our domestic pricing flexibility.
More generally, major third-party payors for hospital services in the United States and abroad continue to work to contain healthcare costs. The introduction of cost containment incentives, combined with closer scrutiny of healthcare expenditures by both private health insurers and employers, has resulted in increased discounts and contractual adjustments to hospital charges for services performed and in the shifting of services between inpatient and outpatient settings. From time to time, initiatives to limit the growth of healthcare costs, including price regulation, are underway in several countries in which we do business. Implementation of healthcare reforms in the United States and in significant overseas markets may limit the price of or the level at which reimbursement is provided for our products.
The United States Anti-kickback law generally prohibits payments to physicians or other purchasers of medical products under federal health care programs, including Medicare and Medicaid, as an inducement to purchase a product. Many states and foreign countries have similar laws. We subscribe to the AdvaMed Code of Ethics (AdvaMed is a U.S. medical device industry trade association) which limits certain marketing and other practices in our relationships with product purchasers. We also adhere to many similar codes in countries outside the United States. In addition, we have in place and are continuously improving our internal business integrity and compliance program and policies.
Federal and state laws protect the confidentiality of certain patient health information, including patient records, and restrict the use and disclosure of such information. In particular, the U.S. Department of Health and Human Services has issued patient privacy and security standards for electronic heath information under the Health Insurance Portability and Accountability Act of 1996 and its implementing regulations (HIPAA). These HIPAA privacy and security standards govern the use and disclosure of protected health information by “covered entities,” which are healthcare providers that submit electronic claims, health plans and healthcare clearinghouses. Our employee health benefit plans are considered ‘covered entities’ and therefore are subject and adhere to the HIPAA privacy and security standards. Additionally, our Merlin.net Patient Care Network system adheres to the privacy and security standards set forth in HIPAA. Failure to comply with HIPAA or any state or foreign laws regarding personal data protection may result in significant fines or penalties and/or negative publicity.
Some medical device regulatory agencies have considered and are considering whether to continue to permit the sale of medical devices that incorporate any bovine material because of concerns about Bovine Spongiform Encephalopathy (BSE), sometimes referred to as “mad cow disease,” a disease which has sometimes been transmitted to humans through the consumption of beef. We are not aware of any reported cases of transmission of BSE through medical products. Some of our products such as Angio-Seal™ use bovine collagen. In addition, some of the tissue heart valves we market incorporate bovine pericardial material. We are cooperating with the regulatory agencies regarding these issues.
The design, manufacture and marketing of our medical devices entail an inherent risk of product liability claims. Our products are often used in intensive care settings with seriously ill patients, and many of the medical devices we manufacture and sell are designed to be implanted in the human body for long periods of time or indefinitely. There are a number of factors that could result in an unsafe condition or injury to, or death of, a patient with respect to these or other products which we manufacture or sell, including component failures, manufacturing flaws, design defects or inadequate disclosure of product-related risks or product-related information. Product liability claims may be brought by individuals or by groups seeking to represent a class.
We are currently the subject of various product liability claims, including several lawsuits which may be allowed to proceed as class actions in Canada. The outcome of litigation, particularly class action lawsuits, is difficult to assess or quantify. Plaintiffs in these types of lawsuits often seek recovery of very large or indeterminate amounts, and the magnitude of the potential loss relating to such lawsuits may remain unknown for substantial periods of time. In addition, product liability claims may be asserted against us in the future, relative to events that are not known to management at the present time.
For the period from June 15, 2008 through June 15, 2009, we maintained product liability policies which provided $350 million of insurance coverage, with a $50 million per occurrence deductible or a $100 million deductible if the claims were deemed an integrated occurrence under the policies. However, we allowed such product liability policies to lapse, and consistent with industry practice, do not currently maintain or intend to maintain any insurance policies with respect to product liability in the future. This decision was made based on current conditions in the insurance marketplace that have led to increasingly higher levels of self-insured retentions, increasing number of coverage limitations and high insurance premium rates. We will continue to monitor the insurance marketplace to evaluate the value to us of obtaining insurance coverage in the future. We believe that our self-insurance program, which is based on historical loss trends, will be adequate to cover future losses, although we can provide no assurances that this will remain true as historical trends may not be indicative of future losses. These losses could have a material adverse impact on our consolidated earnings, financial condition or cash flows.
Our facilities could be materially damaged by earthquakes, hurricanes and other natural disasters or catastrophic circumstances. California earthquake insurance is currently difficult to obtain, extremely costly, and restrictive with respect to scope of coverage. Our earthquake insurance for our significant CRM facilities located in Sylmar and Sunnyvale, California, provides $10 million of insurance coverage in the aggregate, with a deductible equal to 5% of the total value of the facility and contents involved in the claim. Consequently, despite this insurance coverage, we could incur uninsured losses and liabilities arising from an earthquake near one or both of our California facilities as a result of various factors, including the severity and location of the earthquake, the extent of any damage to our facilities, the impact of an earthquake on our California workforce and on the infrastructure of the surrounding communities and the extent of damage to our inventory and work in process. While we believe that our exposure to significant losses from a California earthquake could be partially mitigated by our ability to manufacture some of our CRM products at our manufacturing facilities in Sweden and Puerto Rico, the losses could have a material adverse effect on our business for an indeterminate period of time before this manufacturing transition is complete and operates without significant disruption. Furthermore, our manufacturing facilities in Puerto Rico may suffer damage as a result of hurricanes which are frequent in the Caribbean and could result in lost production and additional expenses to us to the extent any such damage is not fully covered by our hurricane and business interruption insurance.
As of January 2, 2010, we had approximately 14,000 employees worldwide. Our employees are not represented by any labor organizations, with the exception of certain employees in Sweden and France. We have never experienced a work stoppage as a result of labor disputes. We believe that our relationship with our employees is generally good.