Medical device maker Boston Scientific Corp. announced Tuesday that its CEO will step down at the end of the year, just two years after he was brought in to fix a company struggling to integrate a huge acquisition and revive anemic sales of its key implants.
Ray Elliott's departure was unexpected and sent company shares tumbling. The stock lost 69 cents, or 9 percent, to close at $7.02.
Elliott, 61, was hired away from orthopedics maker Zimmer Holdings where he gained a reputation as a CEO who could control costs and boost profitability. At Boston Scientific he focused on paying down debt, restructuring business units and acquiring new technology like asthma treatments, heart valves and women's health products.
While analysts applauded those efforts, they were not enough to make up for flagging sales of its two main products, defibrillators and stents, which combined with expenses to deliver two years of net losses for the company. Boston Scientific's stock has fallen about 30 percent since Elliott joined the company, including Tuesday's decline.
The company, based in Natick, Mass., has struggled for years to manage its costs after the massive 2006 acquisition of defibrillator maker Guidant for $27 billion. At the same time, sales of defibrillators and stents have been hit by safety concerns and cutbacks by hospitals reeling from the weak economy.
Guidant and rival Medtronic each issued high-profile recalls of their implantable heart defibrillators in the second half of the decade. At the same time stents, which are used to prop open clogged arteries, were hit by concerns they could increase risks of blood clots. Defibrillators are pacemaker-like devices that correct dangerous irregular heart rhythms with electrical jolts.
Elliott said the company is well-positioned for growth and it is time for a longer-term CEO. He will remain on the company's board of directors. The company said he will sit on a special committee that will select his successor. It plans to name Elliott's replacement by the end of the year.
Elliott was expected to provide long-term leadership for the company. Boston Scientific courted him with a $1.5 million signing bonus and over $14 million in stock awards. He replaced Jim Tobin, who led the company for more than a decade.
Elliott moved to reposition Boston Scientific by cutting 10 percent of its jobs, restructuring the company, selling its neurovascular business, and acquiring a group of smaller companies. Those changes were designed to bolster revenue and diversify business away from stents and defibrillators, which make up more than half of the company's sales. But problems with those older devices continued to plague the company during Elliott's tenure.
Last March the company was forced to halt sales of its best-selling defibrillators for a month due to what was essentially a paperwork error. The company failed to alert the Food and Drug Administration to regulatory changes in how it made the devices _ a requirement for device makers. Company executives reported a 8 percent loss in market share for the devices as a result of the hold.
Boston Scientific's announcement means there are now two leading medical device manufacturers in search of new leadership. Medtronic Inc., the industry's largest company, is trying to replace CEO Bill Hawkins, who was scheduled to step down at the end of April. The company said Hawkins will remain on the job as the company continues searching for a new CEO.