Dive Brief:
- Globus Medical CEO Dave Demski is resigning effective immediately to pursue "other opportunities" but specifics were not provided.
- Demski has been with Globus for nearly 20 years, spending the last four and a half in the role of CEO, according to the company's Thursday announcement. "There's really no better time for me to step out and try something new with my life," Demski told analysts on a Thursday conference call. "There's really nothing wrong with the company or with me that's driving it. It's the time." The board selected Daniel Scavilla to take over the position immediately; Scavilla has previously served as Globus' CFO and chief commercial officer.
- BTIG analysts wrote in a Friday note that the "surprise CEO transition" — along with soft preliminary first-quarter results, which were also announced Thursday — is a "curveball" for investors. "With FY22 guidance reaffirmed and [Globus'] commentary on its Enabling Tech pipeline robust into 2Q it would seem the business is on solid footing," the analysts said. "Still, we think investors will be left wanting a little bit more as to why now?" The company's stock was down by about 13% Friday morning.
Dive Insight:
Globus develops products for patients with musculoskeletal disorders, with a primary focus on spinal care. The company offers traditional spinal products like spinal screws and artificial discs, but it also has a robotic navigation system.
The smaller Globus and NuVasive are challenging Medtronic as the leader in the robotic spine market.
Truist Securities analysts wrote that they were confident in Scavilla as a replacement, but noted that Demski was an "excellent operator, and oversaw [Globus] through a tremendous period of growth/transformation; thus, big shoes to fill."
Scavilla also served as the president of Globus' trauma business and came to the company after spending 28 years with Johnson & Johnson, according to the company's announcement.
"My message to our surgeons, employees and investors is not to expect sudden or radical shifts in our strategy, structure or market approach," Scavilla said during the Thursday call.
Demski will remain with Globus and help with the transition through June 30.
Along with the CEO move, Globus announced preliminary first-quarter sales of approximately $230.5 million, representing year-over-year growth of 1.4%. Globus reiterated its 2022 sales guidance of just over $1 billion.
The first-quarter sales mark came in nearly $6 million below the consensus estimates but in line with Truist's expectations, according to a Friday note. The analysts wrote that they are "particularly confident in [Globus'] setup into 2023, where we think a combination of robotics, imaging, trauma, and large joints could help to drive an acceleration in growth."
BTIG analysts were a bit more critical of Globus' future, writing that the "CEO change serves as an unneeded distraction and added fuel to the 1Q miss."
While the analysts said that Globus can likely recover in the second quarter, they questioned if the spine market was changing as the company's musculoskeletal business is projected to grow at about 1.3%, which is in line or slightly better than the market but still below the company's past growth "at multiples of the market."
"The question we worry about is whether there has been a shift in competitive dynamics in the spine market," the analysts wrote. "If other companies such as NuVasive put up stronger results, investors may fear the worst and ask questions later on [Globus.]"
In November, Bloomberg and Reuters reported that Globus approached NuVasive about a possible takeover. At the time of the reports, NuVasive declined MedTech Dive's request for comment.
Globus is scheduled to report first-quarter earnings May 10.
