Michael T. Rousseau has exercised a strong behind-the-scenes role shaping St. Jude Medical Inc. into the rapidly growing health care devicemaker it is today, which helps explain why he’s been tapped to become the CEO come January.
Daniel Starks, who has been CEO for 11 years, announced Wednesday morning that he intends to step down as president and chief executive of the manufacturer of artificial heart valves, pacemakers and devices to treat pain and heart failure. Starks, 61, will remain with the company in a more advisory role as executive chairman of the board of the Little Canada-based company.
“The timing is good,” Starks said in an interview. “If I thought we were in a position where the company was about to undertake any special struggles, I would want to stay on board to help work through those struggles. I think that, to the contrary, we are on a good growth track, and we have multiple visible growth drivers that are just coming to bear.”
Rousseau, 59, began his career at St. Jude in 1999 as a senior vice president over global marketing of the company’s traditional sales powerhouse, heart rhythm devices. Ten years later he was named group president and assumed responsibility over the company’s four divisions: cardiac rhythm management, atrial fibrillation, cardiovascular, and neuromodulation. Last year he became St. Jude’s chief operating officer.
He was the architect of a strategy to centralize global functions of the company’s four divisions, many of which were added through the 17 corporate acquisitions St. Jude has done under Starks’ management.
St. Jude Medical stock dropped 3.7 percent to close at $68.59 on Wednesday. Analysts with Leerink Partners in Boston wrote in a note to investors that drop in stock price seemed “overdone,” and was likely in reaction to the realization that Starks’ departure probably closes the door on a rumored potential takeover of the company by Abbott Laboratories.
An Abbott spokesman has said it is not pursuing such a deal. On Wednesday, Starks said the Aug. 27 report in the Financial Times reporting the deal speculation was the first time he’d heard the talk: “It was a bolt from the blue,” Starks said.
The note from Leerink analyst Danielle Antalffy praised St. Jude Medical’s orderly transition of the CEO, a move that she said was not surprising given that the company seemed to be grooming Rousseau for such a role in the past year.
“Given that Rousseau has been with the company for 16 years, we believe little or nothing will change as it relates to the company’s long-term strategy of continuing to innovate — both via internal and external investments — in high-growth med-tech markets within cardiology and neuromodulation,” Antalffy said in the note. “Rousseau may even bring an increased focus on cost-savings to the table — something on which he was very focused as COO.”
Rousseau is known internally for his work revamping St. Jude Medical’s internal planning, which led company executives on July 22 to announce plans to buy California heart-pump maker Thoratec Corp. for $3.4 billion. Expected to close by the end of this year, the deal will be St. Jude’s largest since the company’s founding in 1976.
LifeScience Alley, the Minnesota med-tech trade group where St. Jude is a member, congratulated Rousseau on the announcement. “We are excited to see the organization and its leadership team build on the legacy of growth and success led by Dan Starks over the past 11 years,” LifeScience Alley CEO Shaye Mandle said in an e-mail.
Starks became a director at St. Jude in 1996 and became chairman, president and CEO in May 2004. During his tenure as the chief executive, the company grew from $1.9 billion in annual revenue in 2003 to more than $5.6 billion in 2014 — a period of time marked by significant changes in how health care is paid for and delivered in the United States and globally.
Those changes include a slowdown in sales growth of heart rhythm devices like pacemakers and implantable defibrillators, which have long been key products for St. Jude. Starks’ bio on the company site credits him with transforming the company from being primarily focused on heart valves and rhythm devices to “an industry leader with a broad product portfolio across diverse disease-management areas.”
St. Jude is assembling what it says will be the industry’s most complete line of devices for heart failure, starting with a minimally invasive monitor wireless heart monitor called CardioMEMS to Thoratec’s implantable pumps, which use a propeller device and an external battery to circulate a person’s blood when the heart can’t do the job on its own.
“Over the past 16 years, I have had the privilege of working alongside Dan to change the company from being largely dependent on valves and CRM devices to being an industry leader with a diverse disease state management portfolio,” Rousseau said in a statement. “This is an exciting time for our industry, and I am highly confident in our ability to continue to deliver technologies that transform patient care in markets around the world.”
Starks continues to hold a large block of St. Jude Medical’s stock — 6.1 million shares under direct ownership, as of July 29, securities filings say. He built up that ownership position after St. Jude acquired cardiovascular device maker Daig Corp., where Starks had been president and a director until the 1996 deal brought him to St. Jude.