Wright Medical Gets a New CEO

International orthopedic devices company Wright Medical Group (WMGI - Analyst Report) recently reported that its Board of Directors chose Mr. Robert J. Palmisano as President and CEO, starting from September 17, 2011. Mr. David D. Stevens, who was interim President and CEO, will remain Chairman of the Board.

Mr. Palmisano has notable expertise managing important listed medtech companies. Until recently, he was President and CEO of ev3. During his 2-year stint there, the market capitalization of ev3 jumped more than three fold, from about $800 million in April 2008 to $2,600 million in July 2010.

Mr. Palmisano was President and CEO of IntraLase Corp. prior to joining ev3. Still earlier, he was President and CEO of MacroChem Corporation. He also served as President and CEO of Summit Technology Inc. until it was taken over by Alcon Inc (ACL). Mr. Palmisano occupied several executive posts at Bausch & Lomb Incorporated between 1984 and 1996. He is at present a venture partner of SV Life Sciences and is on the Board of Directors of Bausch & Lomb.

Wright Medical stated that as an incentive for Mr. Palmisano’s leadership at the company, it had authorized the grant of a stock option to him, which was made on September 17, 2011, to buy up to 610,000 shares at an exercise price of $16.03, subject to various terms and conditions.

As Mr. Palmisano assumes the mantle, Wright Medical is for the time being withdrawing its earlier released outlook for revenues and earnings. The company will release updated data on revenues and earnings outlook at its forthcoming third quarter earnings conference call.

Wright Medical Group is a global orthopedic devices company specializing in the development and marketing of reconstructive joint devices and bio-orthopedic materials. It is a leader in the U.S. market for foot and ankle surgical products. The company retains its strength in the niche extremities segment.

We feel future revenue growth will be supported by new product (including internally developed and those from acquisitions) launches. During second-quarter 2011, Wright Medical announced the commercial launch of new products for the foot and ankle market including the INBONE II total ankle replacement system. Moreover, new deals in extremities, Wright Medical’s fastest growing segment, are expected to bolster growth in this business. Within extremities, foot and ankle products are expected to be a major growth driver.

However, our views are moderated by lingering compliance issues and intense competition from larger orthopedic players. Wright Medical competes with much larger players such as Zimmer Holdings (ZMH - Analyst Report), Stryker (SYK - Analyst Report), Johnson & Johnson’s (JNJ - Analyst Report) De Puy and Smith & Nephew (SNN - Snapshot Report). Moreover, the company remains exposed to pricing/procedure volume headwinds. We currently have a long-term Neutral recommendation on the stock, backed by a short-term Zacks #3 Rank (Hold).

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