Boston Scientific taps J&J executive as its next CEO

Tue Sep 13, 2011 8:42pm EDT

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(Reuters) - Boston Scientific Corp named Johnson & Johnson's top medical device executive to be its new president and chief executive, snaring an experienced leader from its larger rival.

Michael Mahoney, 46, who is chairman of J&J's medical device and diagnostics business, will become Boston Scientific's president on October 17 and is expected to become CEO next year on Nov 1, 2012. The delay in assuming the CEO post accommodates Mahoney's post-employment obligations with J&J, Boston Scientific said.

Mahoney replaces Ray Elliott, who announced in May that he intended to step down.

"J&J's medical device business is the world's largest, so this is somewhat of a coup for Boston Scientific in our view," Wells Fargo Securities analyst Larry Biegelsen said.

A J&J spokesman said Alex Gorsky, vice chairman of the company's executive committee, would assume leadership of the medical device and diagnostics group at J&J.

Hank Kucheman, Boston Scientific executive vice president, will serve as Boston Scientific's interim CEO until Mahoney assumes that role. Kucheman who now leads Boston Scientific's cardiology, rhythm and vascular group, the company's largest unit, will also join Boston Scientific's board of directors.

Elliott, who announced plans to retire after two years at the helm of the struggling medical device maker, will assist Kucheman and Mahoney through the end of the year in the transition to their new roles. Elliott will remain on the company's board.

Boston Scientific is facing sluggish growth in its core heart device markets, which generate about 70 percent of the company's total revenue. A slowdown in medical procedures in the weak economy has hurt device sales as patients postpone care.

Safety concerns and fierce competition have dampened revenue from stents that treat clogged arteries, while implantable defibrillators are under scrutiny from a Justice Department investigation into whether the devices are being used in the wrong patients.

Analysts said Mahoney has the right credentials to tackle the job of turning around Boston Scientific, noting J&J's $26 billion medical device division alone is roughly three times the size of its smaller rival in the medical technology sector.

"Mr. Mahoney brings a wealth of medtech and healthcare experience with him, which will help him hit the ground running," said Collins Stewart analyst Tao Levy. "We would be interested in better understanding his reasons for joining Boston Scientific given the challenges that lie ahead."

Boston Scientific has been slashing costs and revamping its product portfolio as it works to turn around its business.

Jefferies analyst Raj Denhoy said Mahoney's biggest task will be to accelerate revenue growth, without which Boston Scientific's stock is likely to remain stuck near all-time lows.

"The next guy coming in is inheriting all these problems. But he's a young guy, and he's got time on his side, right," Denhoy said.

Mahoney was named head of J&J's medical device and diagnostics group in January and led its DePuy orthopedics business before that. He also was an executive in General Electric Co's healthcare unit for 12 years.

Boston Scientific's stock closed up 4 cents at $6.26 Tuesday on the New York Stock Exchange. It was little changed in after-hours trading.

(Reporting by Susan Kelly in Chicago; editing by Andre Grenon, Phil Berlowitz and Bernard Orr)

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