Management Turnover as Change Agent

Monday, April 7, 2008

EV3 Slump, Jettisons CEO, Hires Replacement

EV3 EVVV (NASDAQ), the Minnesota based medical device manufacturer focused on endovascular technologies for the minimally invasive treatment of vascular diseases and disorders, announced the resignation of its CEO, James Corbett and his immediate replacement Robert Palmisano.  Corbett, who had been CEO for four years was in charge of the firm when it first went public back in 2006 and was also responsible for the firm's most recent $1.3 billion acquisition of Fox Hollow Technologies.  In one of today's press releases, the company attributed some of the firm's recent poor financial results to,
... a slower than anticipated rebound in U.S. atherectomy following the integration of the ev3 and FoxHollow sales organizations. In the interim, the company is withdrawing the first quarter and full-year 2008 earnings and revenue guidance previously provided on January 7, 2008. At that time, ev3 said guided first quarter adjusted earnings of $0.08 per share and expected net sales to be $107 million or greater. ev3 also expected its fiscal year 2008 adjusted earnings to be $0.50 per share on sales of $500 million or greater.
The company went on to lower its next quarter guidance.  The real issue, however, has been the company's performance for a significant period of time. Unlike many of its competitors, EV3 has been performing well below the S&P 500.  For some time now the company has shown unimpressive growth in its net income and poor overall performance of its stock.  Back in February of this year the company even lost its chief medical offer, John Simpson. 

EV3 has put a great deal of emphasis on its newly appointed CEO, Robert Palmisano. Palmisano was previously the CEO of  Intralase Corporation.  According to the company's press release,
Mr. Palmisano brings more than 20 years of experience in the pharmaceutical and medical device industries to ev3. He most recently served as President and Chief Executive Officer of IntraLase Corp., a company that designs, develops and manufactures ultra-fast femtosecond laser technology for use in ophthalmology, which was acquired by Advanced Medical Optics, Inc. in April 2007. He has served on the Advanced Medical Optics Board of Directors since April 2007 and on the Osteotech, Inc. Board of Directors since March 2005.
While Palmisano's credentials are impressive, they may not be enough to turn around the fortunes of EV3.  One additional positive qualification he brings to the table is his ability to sell and company at a premium price.  Down the line, that talent may become very important.

Keep a close eye on the specific moves Palmisano takes after a brief honeymoon.  Make sure to monitor what happens in may when the company plans to issue new guidance.

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