Hologic Inc. (HOLX:US)’s Stephen MacMillan, appointed chief executive officer today as the medical tool company reviews its operations, said his focus is on accelerating growth rather than preparing for a sale.
“My mission is to grow the business, it’s not to sell it,” MacMillan, who previously served as CEO of Stryker Corp. (SYK:US) for seven years, said in a telephone interview. “It’s probably too early to commit to any kind of a timeline.”
Hologic, a maker of cervical cancer and biopsy tools, last month forecast (HOLX:US) a sales decline for its fiscal year ending in September 2014, and reported a fifth annual loss in six years. The Bedford, Massachusetts-based company also said today that two independent board directors would be added under an agreement with billionaire investor Carl Icahn, who last month disclosed a 12.63 percent Hologic stake.
“Some investors may be disappointed if they thought a sale of the company was imminent,” Jeremy Feffer, a New York-based analyst at Cantor Fitzgerald LP, said in a telephone interview. MacMillan is known for his operational abilities, he said.
“I don’t think you bring in MacMillan to sell the company,” Feffer said. “At least in the short term, you bring in someone like him to turn it around.”
Hologic fell less than 1 percent to $22.12 at the close in New York. The shares (HOLX:US) have gained 11 percent this year.
Investors shouldn’t look for significant acquisitions or divestitures in the near future, MacMillan said.
“I plan to take it in steps,” he said. “I have to look at the strategic review and bring a fresh set of eyes. We are going to focus on accelerating the growth of some businesses while we assess others.”
Icahn, who has taken stakes and agitated for changes at companies from Dell Inc. to Apple Inc., last month had said he might seek board seats at Hologic.
Icahn allies Jonathan Christodoro and Samuel Merksamer will be added to the board, Hologic said today in a statement, making 10 of 11 directors independent. Icahn, who praised MacMillan’s appointment, said the new board members “will work with the other directors and the management team to enhance the value of the company for all shareholders.”
MacMillan said his priorities would be similar to those of his tenure at Kalamazoo, Michigan-based Stryker, which he led from 2005-2012, helping it grow into the second-largest seller of orthopedic devices. First up was organic growth, followed by supplemental acquisitions and divestitures over time to refocus the portfolio, MacMillan said.
“During his tenure at Stryker, the company made a number of smart strategic decisions, including the acquisition of Boston Scientific’s neurovascular business,” said Michael Manns, an analyst at Bloomberg Industries in Princeton, New Jersey, in a telephone interview. “What he brings is sound financial and operating management skills.”
MacMillan replaces Jack Cumming, who made a second appearance as chief executive officer in July when Robert Cascella quit citing personal reasons. Cumming has served as CEO from 2001 to 2009 and as chairman from 2002 through 2007, and 2008 to 2011.
The challenge for MacMillan will be stiff. Demand is declining for the company’s pap test, blood screening and NovaSure products, while Hologic is waiting for a permanent insurance code from the U.S. Centers for Medicare & Medicaid Services for its 3D tomosynthesis breast cancer detection system.
“I feel an urgency, but am not locked into a time frame,” MacMillan said. The biggest challenge is reaccelerating growth rates and energizing the team to “get us winning again.”
Hologic has been reviewing its operations, which may lead to divesting and selling off units, Feffer said. MacMillan will be effective at trimming costs, the analyst said. Still, Icahn typically looks for bigger returns than the 5 percent or 10 percent that would stem from fixing up the company, Feffer said.
The company has underperformed its peers and the market in recent years, so “it’s going to be an uphill climb,” Feffer said. “They may give him a year or 18 months to see what he can do, then Icahn will step in to cement the deal.”
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