Boston Scientific Corp. (BSX), the second- biggest maker of implanted heart devices, said Ray Elliott will retire as chief executive officer at the end of 2011, sending the company’s shares down the most in 14 months.
Elliott, 61, served as president and CEO for less than two years, taking the helm in July 2009 after serving as chief executive of orthopedics maker Zimmer Holdings Inc. (ZMH) He presided over a period of stagnant revenue as demand waned for the company’s heart stents and pacemakers. He said in February that 2011 would be a “difficult” year for Boston Scientific as economic pressures continued to curb sales.
“Ray Elliott, the tough guy of the industry, after a lot of bluster and bravado, seems to be throwing in the towel,” said Phillip Nalbone, an analyst at Wedbush Securities in San Francisco, in a telephone interview. “It’s a big blow to people who have been pinning hopes for a turnaround at Boston Scientific on Elliott and his team.”
Boston Scientific, based in Natick, Massachusetts, joins Medtronic Inc. (MDT), the largest maker of medical devices, in the search for a new leader. Medtronic Chief Executive Officer William A. Hawkins announced his retirement in December and initially planned to leave at the end of April. Last week, the company said he would remain while the search for his replacement continues.
Sales at Boston Scientific have slowed during Elliott’s tenure, declining 4.7 percent to $7.8 billion last year from 2009. Quarterly sales have yet to surpass the $2.1 billion generated in last three months of 2009, the first full quarter with Elliott at the helm. Revenue fell 1.8 percent to $1.9 billion in the first quarter of 2011.
“It’s a tough industry and it seems to be getting the better of some experienced leaders,” Nalbone said in a telephone interview. “This is bad for investors because Ray convinced people that he had a thoughtful plan and he was going to be there to see it through.”
Boston Scientific declined 69 cents, or 8.9 percent, to $7.02 at 4:00 p.m. in New York Stock Exchange composite trading, in the biggest decline since March 15, 2010. The shares have fallen 29 percent since Elliott took over as CEO, on July 13, 2009, according to Bloomberg data. Minneapolis-based Medtronic rose 41 cents to $42.65.
Boston Scientific’s board has created a search committee to find a successor, the company said in a statement. Elliott, who will remain on the board once he steps down, is a member of the committee and will continue to provide strategic advice to Boston Scientific after he retires, the company said.
Elliott said he has positioned the company for growth after starting a turnaround that included paying down company debt, settling litigation, selling off a neurovascular unit and creating a senior leadership team.
“While the company continues to evolve, we expect that much of the turnaround work will be complete by the end of the year,” Elliott said in the statement. “The time is right for someone new to take the reins, complete execution of that plan and take Boston Scientific to the next level.”
Elliott’s departure in the middle of his plan creates a lot of uncertainty, said Derrick Sung, an analyst with Bernstein Research in New York.
“Does Elliot’s departure signal a lack of confidence in the company’s ability to achieve his goals?” Sung wrote in a note to investors. “Will the new CEO continue down this path, or chart a new course from scratch, rendering the last two years wasted time? The ensuing internal uncertainty at the company could also reduce morale and trigger further departures.”
To contact the editor responsible for this story: Reg Gale at Rgale5@bloomberg.net