Elliott Exit Raises Questions For Boston Scientific
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Ray Elliott plans to step down on Dec. 31 as Boston Scientific's president and CEO.
Ray Elliott, who took over as president and CEO of Boston Scientific about two and a half years ago, recently laid out a long-term, 12-step plan to reposition the Natick-based medical device manufacturer and return it to profitability.
But Elliott will not be running the company to see that plan through. Elliott announced this week that he will be stepping down from his leadership post at Boston Scientific as of Dec. 31.
News of Elliott's planned departure came as a shock to investors who track the company. He's generally been seen as someone who had a vision for the firm and was in the beginning stages of executing it.
Now putting that plan into place will be left up to someone else, it appears, said Raj Denhoy, an analyst with Jefferies & Co. in New York who tracks Boston Scientific.
"I don't think anyone suspected anything like this at all," Denhoy said. "And when the chief architect of a plan steps away, there are a lot of questions that come up."
Now What?
Denhoy suspects that Elliot is leaving the company because it's a high-stress job and he's ready to hand the reins off to someone else.
Elliot came to Boston Scientific after a decade-long career at Zimmer Holdings Corp., another medical device manufacturer based in Indiana, where he rose from a senior executive to president and CEO. Before that, he served as president and CEO of Cybex International in Medway.
Leadership aside, the bigger question for the company is how it will be able to reposition itself in a changing medical device market, Denhoy said.
The company's two major markets, stents and cardiac rhythmic devices, have each experienced downward pricing pressure due to increased competition, according to Jeff Jonas, who tracks the medical device sector for Gabelli & Co., in Rye, N.Y. Boston Scientific still remains one of the top companies in the field, he said, but there have been some "hiccups" in the past few years.
Since the company's purchase of Guidant Corp. in the early 2000s, Boston Scientific has been hampered with legal and regulatory compliance issues related to the acquisition, Jonas noted.
But under Elliott's leadership, changes have been made.
Boston Scientific sold its neurovascular division to Stryker Corp. in California for $1.5 billion in January, which allowed it to pay down some of its debt and acquire other companies. In the last year, Boston Scientific has purchased six other firms in an effort to diversify the business.
In the first quarter of 2011 the company made a $20-million profit on $1.2 billion in sales. That compares to a $1.6-billion loss during the first quarter of 2010 and a year-end loss last year of $1 billion.
In an earnings release from earlier this year Elliott predicted 2011 would be a "difficult" transition period for Boston Scientific.
With Elliott's departure on the horizon, the year could become that much more difficult, said Phil Nalbone, an analyst with Los Angeles-based Wedbush Securities.
The company has already launched a search for a new CEO, which it expects to name by the end of the year. The bigger impact is an air of uncertainty that will hang over the company until a new CEO is named, Nalbone said. The company's stock price dropped 12 percent hours after Elliott's decision was made public on Tuesday.
"I think that a lot of the institutional investors who have got involved with this company's stock since Elliott came on board were really betting more on Ray Elliott than investing in what was obviously a troubled company," Nalbone said.
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