Analysts: Zimmer Biomet CEO’s departure long-needed

(MedCity News) – Late Tuesday, Zimmer-Biomet did what businesses routinely resort to when bad news heads their way.

They try to get ahead of it.

With that aim in mind the Warsaw, Indiana orthopedics giant, pre-announcedthat it now expects its second quarter revenues to be about $1.95 billion, a mere 1.1 percent increase over the comparable period a year ago. The company had previously expected second-quarter revenue in the range of $1.94 billion to $1.96 billion. On an organic basis, the revenue declined 1.3 percent, per analysts. What’s more, in a separate announcement, the company revealed that CEO David Dvorak had stepped down as president and CEO after 10 years at the helm. He will stay on as an advisor to help with the transition.

Analysts praised the move.

“In our view, ZBH has been a company in need of new direction and better leadership for some time,” wrote Glenn Novarro, an analyst with RBC Capital Markets, in a research note late Tuesday. “We view the CEO leadership transition favorably for longer-term focused investors.”

Another analyst also seemed to be viewing Dvorak’s departure as good news for shareholders. “… tonight’s simultaneous announcement that President/CEO David Dvorak is stepping down, in our view caters to what we believe has been an evolving [Zimmer Biomet] “bull” thesis in recent months: that poor execution (i.e. supply issues, continued guidance re-sets) can only go on for so long before prompting a leadership change and ultimately renewing promise of improved execution & increased value creation potential for shareholders into the future,” wrote Richard Newitter, an analyst with Leerink Partners.

The news of Dvorak’s departure comes on the heels of several management changes, per Novarro.

“Mr. Dvorak’s departure comes after several other past management changes including a new SVP, Global Operations and Logistics and a new VP, Quality Assurance,” Novarro wrote.

What has been plaguing Zimmer has been supply issues that have forced existing customers to seek hips and knees elsewhere and the company’s inability to win them back once it overcame supply problems in some cases.

“While production output increased at our legacy Biomet manufacturing site in Warsaw, Indiana during the second quarter, certain brands did not achieve targeted production levels as quickly as anticipated,” interim CEO Florin said in a news release. “We also experienced slower than expected sales recapture from previously affected customers in the United States.”

An executive search firm is being retained to find Dvorak’s replacement but a turnaround won’t be quick, warned Newitter.

By Arundhati Parmar | MedCity News

Illustration Credit: lvcandy, Getty Images

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About Peter Coffaro 1136 Articles

A growth-driven and strategic executive, Peter Coffaro commands more than 20 years of progressive management success within the medical device industry. As a District Sales Manager for Stryker Orthopaedics, Peter was responsible for managing and directing a regional sales force to achieve sales and profit goals within the Rocky Mountain region. Previously, he was the Director of Sales & Marketing for Amp Orthopedics. In this role, Peter was responsible for planning, developing, and leading all sales and marketing initiatives. Peter is a former orthopedic distributor in the Pacific Northwest. He has also worked with DePuy Orthopaedics as well as Zimmer, and held positions in sales, sales training, and sales management. Peter has an extensive background in organizational development, business development, sales management, negotiating and P&L management. Peter holds a B.S. degree in Biology from Northern Illinois University.

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