Dive Brief:
- Medical and surgical supply distributor Owens & Minor named board member Robert Sledd as chairman and interim president and chief executive, succeeding P. Cody Phipps.
- The board has formed a search committee to recruit a new CEO with the help of an executive search firm.
- Anne Marie Whittemore, lead director, said "the board believes the business will benefit from a change in leadership."
Dive Insight:
The leadership shakeup comes against the backdrop of consistently disappointing earnings that have seen the company's shares shed 75% of their value over Phipps' three-year tenure. "We are not overly surprised to see Owens & Minor's announcement this morning that they replaced CEO P. Cody Phipps," Leerink analyst David Larsen said in a note to clients following the news Thursday.
The release of the company's third-quarter earnings report on Oct. 31 triggered a massive one-day sell-off from which the stock has yet to recover. The weak results were attributed to continued pricing pressure and warehouse inefficiencies in the company's domestic hospital supply distribution business.
Owens & Minor has attempted to offset the ongoing pressures on that business by diversifying into the medical products segment itself with the acquisition in May of the surgical and infection prevention unit of Halyard Health for $710 million. The business makes hospital supplies such as sterilization wraps, surgical drapes and gowns, facial protection and medical exam gloves.
Last year, Owens & Minor also paid $380 million to acquire Byram Healthcare, a distributor of medical supplies sold directly to patients and home health agencies.
Leerink's Larsen said the appointment of Sledd indicates the company is still planning to execute its strategic plan. Sledd has served on the company's board for 11 years and has two decades of experience in the distribution business.
Sledd previously was chairman and CEO of Performance Food Group, a foodservice distribution company. Most recently, he was managing partner of Pinnacle Ventures and Sledd Properties. He also spent four years as senior economic adviser to the governor of Virginia.
"While we are disappointed with their performance over the past few years, we are encouraged to see action being taken to turn the business around, including the selection of Mr. Sledd as interim CEO who has deep distribution and OMI experience and knowledge," Larsen said.
