Following Tuesday's announcement that David Dvorak and James Crines were replacing Ray Elliott and Sam Leno as CEO and CFO at Zimmer, Smith & Nephew announced today that its CEO for last the 10 years, Sir Christopher O'Donnell, will retire as CEO on June 30, 2007. It was also announced that Mr. O'Donnell will resign as a Director of Smith & Nephew on July 31, 2007
As our article on Tuesday stated there have been 14 significant management changes in the orthopedic sector since April 2004. More importantly, all five of the large orthopedic companies (Smith & Nephew, Zimmer, Biomet, Stryker and JNJ/Depuy) have made changes in the last two years. Excluding Stryker, all of the changes made at the remaining top four occurred in the last year.
While the amount of turnover at the top in the last two years is significant, the turnover at the top four orthopedic companies in the last 12 months is intriguing. Although it may be completely coincidental, all four of these companies received Department of Justice (DOJ) subpoenas in March 2005 pertaining to surgeon consulting agreements the respective companies had entered. Orthopedic analysts and investors may draw conclusions that the recent turnover is a result of the DOJ putting pressure on these companies to make management changes or the companies themselves preempting any DOJ decision as a means to demonstrate their willingness to change.
Either way, we believe that the former, or soon to resign, CEOs of the top five orthopedic companies including Jon Brown at Stryker, Ray Elliott at Zimmer, Dane Miller at Biomet and Sir Christopher O'Donnell at Smith & Nephew have done a tremendous job maturing the orthopedic industry and making it the best sector in healthcare.
