News that Boston Scientific Corp. (NYSE:BSX) is looking for a new CEO now that Ray Elliott plans to hang up his spurs at the end of the year shocked Wall Street, where BSX shares plunged nearly 9 percent on the day.
The Natick, Mass.-based medical device maker said its corner office will be empty as of Dec. 31, when Elliott will step down after less than three years.
Elliott, known as a turn-around artist in financial circles, said it was hard to decide when to leave, but sounded as if leaving was in the cards all along.
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“Finding the right time to leave is difficult. Leaving too soon or staying too long can both be problematic,” Elliott said in prepared remarks, adding that “it’s time for me to permanently pass the baton to a long-term CEO.”
A Boston Scientific spokesman was coy when asked if the news came as a surprise on the Natick campus.
“Ray always knew that accomplishments, not years, would dictate the right time to leave. When a person assumes a CEO position, he or she does not know exactly how long it will take to complete what is set out to accomplish,” director of communications Erik Kopp wrote MassDevice in an email. “The strategic initiatives Ray has established as CEO have evolved to a point where he believes now is the right time to transfer things to a new CEO to see them through long-term.”
A special CEO search committee will seek candidates to replace Elliott from “both inside and outside of the company,” Kopp added.
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“Those most qualified for the position will be considered,” he told us.
The new sheriff in town makes his mark
Elliott inherited a shambling mess when he took over in July 2009 from Jim Tobin. Boston Scientific was saddled with an enormous — and soon-to-be-due — debt load from a $27 billion folly of an acquisition, the 2006 buyout of Guidant Corp., and bleeding market share to competitors in its core stent and cardiac rhythm management businesses.
Worse news was on the horizon. Boston Scientific was on the wrong end of billions of dollars worth of legal decisions in a long-running legal war over stent technology with Johnson & Johnson’s (NYSE:JNJ) Cordis Corp. A pair of missed filings forced it to hold CRM shipments for about a month early in 2010 and in February 2009 announced that it would slash 1,300 positions from its workforce.
Elliott was quick to put his stamp on BSX. On top of the layoffs, he reshuffled the executive deck, replacing more than 75 percent of his senior management team. Boston Scientific paid down more than $2 million of its long-term debt and sweet-talked one of the three major rating agencies to an upgrade from junk bond status on Elliott’s watch. Elliott negotiated the $296 million between Guidant and the U.S. Justice Dept. over faulty implantable defibrillators.
Boston Scientific will have a sleeker profile by the time he’s done. Elliott sold its sagging neurovascular business to Stryker for $1.5 billion late last year. And he cleaned house after discovering ethical violations by several BoSci sales staff and managers from its CRM division in Minnesota over contact with doctors and other healthcare workers.
“There’s a line in the sand and it’s binary,” Elliott said at the time. “We are going to run the company properly, and if we’re a somewhat smaller company short term or long term, so be it.”
That fiestiness will be missed by many who follow the company’s fortunes. His candid and sometimes pugnacious nature was evident many times, including early on with his response to a Heart Rhythm article (PDF) that found a potentially fatal design flaw in BSX’s Cognis and Teligen defibrillators.
The journal “was completely out of line to publish this article prematurely,” Elliott said at the time. Boston Scientific, which had already issued a warning about the potential problem, laid the blame at the feet of leads manufactured by other companies.
Elliott wasn’t shy about public confrontation with rivals, either. When St. Jude Medical (NYSE:STJ) hired a pair of the reps swept out of the Minnesota CRM business, he took a swipe during an earnings call.
“We didn’t like the response of St. Jude Medical to the disciplinary actions we took,” he said. “So-called ‘greener pastures’ may allow for a more relaxed viewpoint” about industry-physician contact, but “the problem with pastures are you have to be careful where you step.”
“The remarks from this morning strike us a little bit like a bitter spouse after a bad divorce,” a St. Jude spokeswoman retorted.
Just last week, Elliott dissed St. Jude and Medtronic (NYSE:MDT) during a conference call ahead of the annual Heart Rhythm Society meeting in San Francisco, taking specific aim at Medtronic’s Protecta implantable cardioverter-defibrillator and STJ’s Quartert quadripolar left ventricular pacing lead.
“Protecta is a catch-up product,” he said. “We’ve had that technology since 2008. I know Medtronic wouldn’t agree, but they’d be wrong.”
He then fired a shot across the bow of Medtronic’s Twin Cities neighbor, calling St. Jude’s new lead “99 percent hype.”
“There’s been a massive amount of curb appeal on the [Quartet], but it’s really 99 percent hype. It’s as simple as that,” Elliott said.
The Massachusetts Medical Devices Journal is the online journal of the medical devices industry in the Commonwealth and New England, providing day-to-day coverage of the devices that save lives, the people behind them, and the burgeoning trends and developments within the industry.
