Management Turnover as Change Agent

Tuesday, January 27, 2009

CardioNet CEO Leaves

Cardionet BEAT (NASDAQ) the medical device company that provides a wireless method for diagnosing and monitoring cardiac arrhythmias announced that Arie Cohen, the president and CEO of the firm since November 2007, was leaving the firmArie Cohen to pursue other opportunities.  The announcement came shortly before the company’s conference call on quarterly earnings.  The company’s board announced that it’s executive chairman Randy Thurman would become the interim president and CEO.   The company has also initiated an executive search for a permanent replacement.  According to the company’s press release,One Year Stock Performance

Thurman most recently served as Chairman and CEO of VIASYS Healthcare Inc., a global medical technology company that was acquired by Cardinal Health in June 2007 for $1.5 billion. From VIASYS’ successful IPO in 2001 to 2007, Mr. Thurman spearheaded an aggressive growth strategy that increased the Company’s revenues from $320 million to $700 million and positioned the Company to consummate twelve strategic acquisitions over a six-year period.   

… Prior to VIASYS, Mr. Thurman was Chairman of the Board and CEO of Corning Life Sciences, a diversified medical technology company with a focus in contract pharmaceutical research, contract biologic manufacturing and clinical diagnostic testing. Earlier in his career, Mr. Thurman was President of Rhone-Poulenc Rorer Pharmaceuticals Inc., a global, research-based pharmaceutical company. Mr. Thurman was named by Ernst and Young as Entrepreneur of the Year in healthcare technology in 2007. He is currently Senior Advisor to New Mountain Capital, LLC, a leading private and public equity investment firm.

For the moment the company appears to be in good hands.  Thurman is a consummate executive.  The question remains what exactly was behind the move by Cohen?  Was he pushed out, does he have a possible opportunity and, if so, why would it be better than his previous position at CardioNet?  Investors need to play close attention to the recent management changes at the firm. Back in late September 2008 The Wall Street Transcript interviewed Sara Michelmore, Managing Director & Senior Research Research Analyst in the medical technology group of Cowen & Company.  In the interview Ms. Michelmore discussed CardioNet.  According to Michelmore,

CardioNet is a company that makes a mobile, outpatient arrhythmia monitoring system. It competes with some older technologies like Holter monitors and event loop monitors. It’s a really neat technology, a very high end piece of device equipment, with very high end analytical technologies at their service center. They’ve got a good amount of momentum right now; it’s a large market opportunity for them, probably in excess of $1.5 billion. Their penetration currently, of the cases that they would go after, is 5%. In the last 18 months, they have made some significant commercial strides, expanded their sales force almost 4 times and have had some really strong momentum recently in reimbursement coverage. It’s currently covered by Medicare, although they are also probably going to have a new CPT code that goes into effect January 1, 2009. And they have had a significant amount of new, private, commercial payers get on board with that company as well. We like that one; we think it’s a neat story and a good management team as well.  

It is odd that Cohen would leave the company now to pursue another opportunity just as the US Government is getting close to possibly putting huge dollars into the healthcare system. Stay tuned.  

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