New BSX Chief Adds Fuel To J&J Rivalry
Boston Scientific and Johnson & Johnson have a long history of interactions.
The two medical device giants are not just competitors, but legal foes as well.
During the past decade, billions of dollars have changed hands between the companies because of patent disputes related to cardiovascular and stent products both companies make.
So when Boston Scientific announced last week that it tapped one of J&J's senior executives to be the company's next president and CEO, the move sent rumblings through the investing community not just because of its influence on how BSX will be managed in the coming years, but because it adds a new dynamic to the BSX-J&J rivalry.
Nonetheless, analysts are applauding the move by the Natick-based manufacturer in naming Michael Mahoney, chairman of J&J's worldwide medical device and diagnostics group, to be the next president and CEO.
Analyst Reaction
Mahoney's strongest benefit: his resume.
"It's a good move, a good selection," said Tao Levy, an analyst with Collins Stewart LLC in New York.
Mahoney will join BSX from the largest medical device manufacturer in the U.S. in J&J, where he held a senior executive position.
Before that, Mahoney served as worldwide company group chairman for DePuy, which is a part of J&J, from 2007 to 2010. DePuy's size is comparable to that of BSX.
"He certainly has experience running major medical device firms," Levy said.
Mahoney noted that in a release from BSX announcing his appointment.
"My experiences leading complex businesses, developing international markets and driving operational excellence for other world-class companies will serve me well in my new role," Mahoney noted in the press release. "I am making a long-term commitment to continue Boston Scientific focus on innovation and delivering improved patient care while revitalizing the company's sustainable growth..."
The move is as much about who Boston Scientific appointed as what he will do, Levy said.
Mahoney is replacing Ray Elliott, who announced earlier this year he would step down, but will continue in an advisory role while sitting on the board of directors.
Before he left, Elliott set up a strategic plan for the future of the company and analysts have said whoever was appointed the next CEO would have marching orders on how to run the company using Elliott's blueprint.
The plan calls for the company to reduce debt levels to allow for expansions into new and emerging markets.
But BSX may have gotten a jump-start on the plan to spread out, even before Mahoney takes over.
Earlier this year, the company announced a $150-million investment in China, which will include the hiring of up to 1,000 workers with the goal of increasing sales to $500 million in the Asian country by 2016.
That's in addition to other recent major moves the company has made. Last year, it sold its neurovascular division to Stryker Corp. for $1.5 billion and recently announced a downsizing of employees and shedding of debt. All of the moves seem to be positioning the company to be able to execute the strategy Elliott has laid out, and one Mahoney will likely continue to execute when he takes over.
In the article, "New Sheriff In Town," Charlie Chon, a BSX analyst with Stifel, Nicolaus & Co. of Baltimore, praises Mahoney's appointment, specifically because of BSX's long transition period for a new executive.
Mahoney will be able to ease into the role during the next year. He takes over the president's position October 17, and will ascend to the CEO position in November 2012.
In the meantime, the company's executive vice president, Hank Kucheman, will be interim CEO and has been appointed to the company's board of directors.
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