It’s been more than seven months since Ray Elliott succeeded Jim Tobin as CEO of Boston Scientific Corp. (NYSE:BSX). In that time, and especially recently, Elliott has made it clear that things in Natick, Mass., will be different under his guidance.
And he’s not taking any guff about it, either.
February has seen the biggest changes at Boston Scientific since its $26 billion acquisition of Guidant Corp. and its long, tarnished aftermath. This month alone the company embarked on a soup-to-nuts restructuring that will see it lay off 1,300 workers and re-shuffle its management deck, revealed a $1.7 billion settlement with rival Johnson & Johnson (NYSE:JNJ) of several stent patent infringement cases, lashed out at a medical journal that reported a design flaw in two of its latest-generation pacemakers, fired a bevy of sales reps from its heart rhythm business for "disciplinary" reasons and then excoriated another rival, St. Jude Medical Inc. (NYSE:STJ) for quickly hiring its castoffs.
The restructuring, announced as BSX posted 2009 net losses of $1.03 billion, or 68 cents per share, on sales of $8.19 billion, will see the company lay off between 1,000 and 1,300 workers and vastly re-work its corporate and management structures. Boston Scientific said it will merge its cardiovascular unit with the heart rhythm business it acquired in the Guidant buyout and announced a slew of management changes designed to give Elliott a closer look into the operations of each division.
If that weren’t enough, Elliott emerged in recent days as force to be reckoned with, beginning with the company’s response to a Heart Rhythm article (PDF) that found a potentially fatal design flaw in its Cognis and Teligen brand defibrillators. According to the report’s examination of a Cognis device that malfunctioned shortly after implantation, the devices can deliver unnecessary and potentially life-threatening shocks due to a weak bond between the device’s body and the "header," a part that holds the wires connected to the patient’s heart.
Boston Scientific’s response was quick, public and vociferous.
"We find it unacceptable that Heart Rhythm rushed this manuscript to publication and speculated on the cause of the problem without requesting from us a detailed engineering analysis of the explanted device," the company said in a press release. "Our analysis found that while the bond between the header and the case was weakened, the device functioned normally and a weakened header bond was not the cause of the abnormal sensing and pacing impedance observed in this patient."
Elliott took things a step further in a conference call with analysts, saying the journal “was completely out of line to publish this article prematurely,” according to Dow Jones Newswires. Boston Scientific, which warned of the potential problem late last year, said it’s taken steps to correct the header bond problem, saying it believed the malfunctions were not caused by that issue but by problems with leads manufactured by other companies.
“Clearly their device had a problem, and their testing was not able to reproduce it,” Dr. William Maisel, a prominent cardiologist and co-author of the study, told the Wall Street Journal.
Elliott further demonstrated his antipathy to mincing words in a discussion of the firing of several BoSci sales staff and managers from its CRM division in Minnesota. Coy about the exact number that were let go, all Elliott would confirm as the reasons behind the firing were repeated breaches of the company’s code of conduct governing contact with doctors and other healthcare workers.
“There’s a line in the sand and it’s binary,” Elliott said during the conference call. “We are going to run the company properly, and if we’re a somewhat smaller company short term or long term, so be it."
Sales representatives in the competitive $11 billion heart-rhythm market can take business with them to rivals, and indeed, Elliott said St. Jude Medical Inc. (STJ) “has chosen to quickly hire many of our departed staff.”
Elliott then took a swipe at St. Jude Medical, accusing it of swooping in to hire the fired reps.
“We didn’t like the response of St. Jude Medical to the disciplinary actions we took during December,” he said.
“So-called greener pastures may allow for a more relaxed viewpoint” about industry-physician contact, but “the problem with pastures are you have to be careful where you step.”
St. Jude spokeswoman Angela Craig told Dow Jones said her company only hired two of the CRM sales reps fired by Boston Scientific. STJ abides by strict rules too, Craig said, taking the opportunity to swing back at Elliott.
“The remarks from this morning strike us a little bit like a bitter spouse after a bad divorce,” she said.
And to think it’s only February. It’s going to be an exciting year on the Boston Scientific beat.
