Cardiovasular device powerhouse Guidant (Indianapolis, Indiana) reported on May 18 that Ronald Dollens, the company's president and chief executive officer and a guiding force for the company since its founding, will retire on Dec. 31. The announcement came as a surprise to most industry watchers. Guidant, which made the announcement at its annual shareholders meeting, said its board of directors expects to select a new CEO by year-end.
Dollens has been Guidant's CEO from its initial public offering and subsequent spin-off from Eli Lilly and Co. (also Indianapolis) in 1994 to the present. He served a combined 32 years with those two companies. The company said Dollens' retirement also heralds a management restructuring. The current office of the president, which was formed three years ago, has been revised.
As part of the restructuring, Group Chairman A. Jay Graf, also a member of the office of the president, said that he intended to retire from the company in July. Graf had supervised Guidant's four operating units. However, after the company reported manufacturing and/or design "issues" with its Champion stainless-steel stent in late May, Graf indicated he would delay his retirement plans, if necessary, to support the organization until those issues are resolved.
Effective immediately, Group Chairman Guido Neels will be elevated to become the company's chief operating officer to replace Graf. Neels, who currently oversees worldwide sales and distribution, will expand his current responsibilities to include global operations. Consequently, now also reporting to Neels will be the presidents of Guidant's four operating units: Cardiac Rhythm Management, Vascular Intervention, Cardiac Surgery and Endovascular Solutions.
Neels, who has more than 30 years of global business experience, was appointed to his current post in December 2002. Prior to that, he served as president, Guidant Europe, Middle East, Africa and Canada. He also served as vice president, global marketing for Guidant Vascular Intervention and presided over the company's German and Central European operations as managing director.
Guidant has enjoyed enormous success under Dollens' watch, including an average sales growth of 17% and an average profit growth of 29% over the past decade. Added to that is the fact that the company's market capitalization today is nearly 20 times larger than at its inception as a public company on the New York Stock Exchange.
"The company could not have had this level of success if it had stayed within, I think, a large corporate entity," Dollens told Cardiovascular Device Update. "It was the fact that you could get alignment and accountability around a publicly traded firm that allowed us to be as successful as we have been."
Dollens said that things have become "much more transparent" in his time in the medical device industry. "For instance, when we started, we had to teach all of Wall Street about the technology. We had to introduce [the investment community] to clinicians; they had no contacts on their own. All of that has just changed immensely. The day-to-day visibility within the industry is just incredible."
While he largely viewed this transparency as a positive for the industry, Dollens said that he believes there won't be many long-tenured CEOs like himself, particularly in Fortune 500 companies, where the average tenure is now about 4.8 years. "I just think that the level of intensity is one that it's going to be the exception for more than 10 years as a CEO," he said.
Guidant, which once enjoyed a dominant position in the coronary stent market, has fallen behind the competition in recent years in developing more advanced drug-coated versions of its mainstay product. That resulted from a series of clinical and legal missteps as well as the failed planned acquisition of privately held Cook (Bloomington, Indiana) in an attempt to gain access to a drug-eluting stent (DES).
The company now lags behind Johnson & Johnson (J&J; New Brunswick, New Jersey) and Boston Scientific (Natick, Massachusetts), both of which sell DES systems in the U.S. Guidant has said it expects to have a drug-coated stent on the domestic market by early 2006, which puts the company fourth in line behind Medtronic (Minneapolis, Minnesota), which anticipates launching its DES product in late 2005.
While Dollens' retirement may appear sudden, he insists that is not the case. Instead, he said it was part of an orderly transition that dates to 2000. Back then, he said it was more about mentoring. "We think that job is done, [and] the management team that's on board at the most senior levels of the corporation are just absolutely fully capable," he said.
In fact, Dollens said that he was set to retire a year ago. "There was uncertainty around the business, and we needed to have more clarity on that before Jay [Graf] and I were willing to leave."
An example of that clarity came in February when Guidant announced an alliance with J&J subsidiary Cordis (Miami Lakes, Florida), maker of the FDA-cleared Cypher sirolimus-eluting stent, for the co-promotion of DES technology on the one hand and new technology in coronary stent delivery systems on the other. That agreement, Guidant said at the time, gives it "immediate access" to the DES market
As added proof of the company's long-term health, Dollens cited the stability of the remaining management team. "Dana Mead, president, Vascular Intervention, will continue to lead our drug-eluting stent efforts as we progress on track toward commercialization. Our Cardiac Rhythm Management business, led by Fred McCoy, should continue to see healthy growth going forward. Each of these talented individuals is supported by exceptional managerial talent throughout the organization."
According to Larry Haimovitch, president of Haimovitch Medical Technology Consultants (Mill Valley, California), who covers the cardiovascular market for CDU and its sister publication, Medical Device Daily, Dollens will be missed. "One person doesn't make a company," said Haimovitch, "but he clearly has set a great strategic vision for the company. He has aggressively dealt with their issues and problems. He's a straight shooter."
While Dollens is retiring, that doesn't mean that he is slowing down. Indeed, he said he will continue his active leadership role in global public policy organizations through the end of the year. He currently serves as chairman of the Healthcare Leadership Council in Washington. Additionally, he said he will continue to serve on four university advisory boards, six non-profit boards and two other publicly traded company boards. "I have more than enough [to do]," he said.
Dollens is a past chairman of the Advanced Medical Technology Association (AdvaMed, Washington). He also recently served on the Advisory Committee on Regulatory Reform, a group appointed by U.S. Health and Human Services Secretary Tommy Thompson.
Guidant, which has 12,000 employees, is the sixth-largest U.S. medical device company in terms of market capitalization ($19.1 billion). For the quarter ended March 31, it earned $139.4 million, or 44 cents a share, on revenues of $934.1 million.