Ahead of the Bell: Boston Scientific names new CEO

AP News
Posted: Sep 14, 2011 9:16 AM
Ahead of the Bell: Boston Scientific names new CEO

Boston Scientific Corp.'s choice of Johnson & Johnson executive Michael Mahoney to become its next leader drew praise from analysts covering the medical device maker.

The Natick, Mass., company said after the markets closed Tuesday that Mahoney, 46, will become president on Oct. 17 and is expected to become CEO in November 2012. Current CEO Ray Elliott will step down on Oct. 17 as president and CEO. William H. "Hank" Kucheman will serve as interim CEO until Nov. 1, 2012, when Mahoney will take over that title.

Boston Scientific had announced in May that Elliott would step down at the end of the year, an unexpected change that sent the company's shares tumbling at the time.

But Mahoney's hiring was better than Citi analyst Matthew Dodds expected.

"We were impressed with Mr. Mahoney during his time at (J&J) and expect he will be well received both internally and externally at (Boston Scientific)," Dodds said in a Tuesday research note.

Mahoney has been the chairman of Johnson & Johnson's medical device business since January. Before that, he led its DuPuy orthopedics and neuroscience unit. Boston Scientific said he will be in charge of its cardiac rhythm management and endoscopy businesses starting in October, and will take over the neuromodulation business next August.

"We believe that the announcement of an experienced MedTech executive becoming CEO of (Boston Scientific) scratches one of the many obstacles which had limited investor appetite in the shares," Collins Stewart analyst Tao Levy said in a separate statement.

Dodds said the company still faces challenges that include strong competition and a limited pipeline of products under development. He also criticized the timing of Mahoney's arrival.

"Given that we didn't think someone of Mr. Mahoney's caliber was available, the requirement that he wait one year before becoming CEO is quite odd and is less than ideal," the analyst wrote.

Boston Scientific said Tuesday that Mahoney's transition period honors a non-compete agreement with J&J, and both companies agreed it was appropriate.

Boston Scientific shares closed at $6.26 in Wednesday before the executive announcement.