Medtronic Acquires Transneuronix, Inc.; Industry Leader In Electrical Stimulation Therapy For The Treatment Of Obesity

Medtronic Begins Trial of Gastric Electrical Stimulation In Patients with Diabetes

MINNEAPOLIS – June 29, 2005 – Medtronic, Inc. (NYSE: MDT), today announced that it has agreed to acquire Transneuronix, Inc., a privately held medical device company focused on the treatment of obesity by stimulation of the stomach with an implantable pacemaker-like device. The product delivers electrical pulses to the stomach. The acquisition has been approved by Transneuronix stockholders and the parties have received early termination of the waiting period under the Hart-Scott-Rodino Act. The transaction is expected to close within the week.

The acquisition follows Medtronic’s recent announcement regarding the formation of a new business unit, Medtronic Obesity Management. “The acquisition of Transneuronix plays a key part in our strategy to deliver therapeutic solutions for the worldwide challenges of obesity,” said Bill Hawkins, Medtronic president and chief operating officer. “Because obesity is linked to so many associated health problems, there is a great sense of urgency to find successful long-term treatment options for these patients.”

“Medtronic has been invested in Transneuronix, and we know the technology very well,” said Gary Lubben, vice president and general manager of Medtronic Obesity Management. “Through

Transneuronix’s clinical trial and European market experience, we are confident that we can grow this business and help patients and physicians address a very troubling disease.” Medtronic has been a supplier of the company’s implantable stimulation devices and programmers.

Under the agreement, Medtronic will acquire Transneuronix for an initial payment of approximately $260 million and will make additional payments to Transneuronix shareholders if significant revenue objectives are achieved.

Transneuronix has been conducting research using gastric electrical stimulation for the treatment of obesity for more than eight years in the United States and Europe. Since the first implant in 1995, more than 700 patients have been implanted with Transcend®, the company’s Implantable Gastric Stimulator (IGS®). More than 300 patients have been enrolled in Transneuronix-sponsored trials that have demonstrated meaningful reductions in excess weight with a good safety profile. Most current therapies designed to treat obesity involve highly invasive surgical procedures with significant early and late complications. The Transcend system has been commercially available in Europe for more than three years, and Transneuronix recently received regulatory approval to begin marketing the Transcend system in Canada.

In the United States, Transneuronix has completed enrollment in its U.S. pivotal trial. The U.S. trial is a multi-center, blinded, randomized control study designed to demonstrate weight loss in comparison to a control group.

“Transneuronix has made great strides in the development of gastric electrical stimulation over the last five years through product enhancements, clinical trials and advances in patient identification and selection,” said Dr. Louis J. Aronne, clinical professor of medicine at Weill Cornell Medical College, adjunct clinical associate professor of medicine at Columbia University, director of the Comprehensive Weight Control Program at New York-Presbyterian Hospital, and president of the North American Association for the Study of Obesity.

“We look forward to the clinical results of the U.S. trial this fall and hope this therapy becomes available to patients in the United States in the near future,” added Dr. Aronne. New York-Presbyterian Hospital/Columbia University Medical Center is one of eight sites in the United States participating in the trial.

Obese people have an increased risk of developing other serious medical problems such as diabetes, heart disease, high blood pressure, stroke and cancer. The National Institute of Diabetes & Digestive & Kidney Diseases estimates that patients with a high Body Mass Index (BMI) cost the U.S. healthcare system more than $60 billion a year in direct medical costs.

Medtronic Initiates Feasibility Trial of Transneuronix Technology in Diabetes Patients
Medtronic also announced its initiation of the ASSIST (Appetite Suppression Induced by Stimulation Trial) feasibility trial to test the safety and efficacy of gastric electrical stimulation (GES) for the treatment of obesity in patients with type 2 diabetes. The first implant occurred June 7, 2005, at Scripps Memorial Hospital La Jolla, in San Diego. Dr. Mark Sherman performed the implant of the gastric stimulator and two stimulation leads. The leads, or wires, are implanted into the wall of the stomach via laparoscopy.

The ASSIST trial is designed to determine if type 2 diabetes patients with concomitant obesity who receive gastric electrical stimulation have a minimum mean excess weight loss greater than a control group. The trial will evaluate excess weight loss and glycemic control. The feasibility trial will take place in a small number of select centers in the United States.

“Gastric electrical stimulation could be a solution that provides treatment options for weight loss and subsequent reduction of type 2 diabetes mellitus,” said Dr. Daniel Einhorn, an endocrinologist and principal investigator at Scripps La Jolla. “This study brings a multi-disciplined approach to obesity and diabetes management, and provides the opportunity to improve management with other therapeutic and surgical options for obesity.”