Miller’s Exit from Biomet Raises Speculation

Biomet’s Miller: Abrupt departure.

The orthopedics industry is still reeling from the sudden resignation late last month of Dane Miller as chairman and CEO of Biomet Inc. (Warsaw, IN). Industry analysts were genuinely surprised by the move, which is now generally attributed to a rift between Miller, one of the original founders of Biomet, and the company’s board about the future direction of the company. Daniel Hann, senior vice president, chief counsel, and secretary, was named interim president and CEO.

Biomet’s Noblitt: A resounding endorsement.

Although some viewed Hann as a surprise pick, he received a resounding endorsement from Biomet board chairman Niles L. Noblitt. He described Hann as “a talented and results-oriented executive” with more than 17 years’ experience at Biomet. “He knows the company intimately, shares our commitment to building shareholder value, and is well positioned to move the company forward,” Noblitt said.

Miller, who will remain with Biomet as a director and consultant, was one of the four founders of Biomet. He has been president, CEO, and a director of the company since its formation in 1977.

Scott Harrison, MD, lead director of the board, said that Biomet could not have achieved its current level of success without Miller’s “extraordinary vision, talent, and leadership over the course of nearly three decades.”

Commenting on his departure, Miller said, “I believe in Biomet and its team members, and their ability to continue to deliver quality products and enhance shareholder value. As I begin a new stage in my life, I will always be grateful to have worked with the great people at Biomet and to have played a role in its growth and success.”

Many analysts speculated that the board’s desire to have a CEO with a greater focus on “building shareholder value” was likely at the core of its disagreement with Miller.

Analyst Denhoy: Shocked by departure.

“Dane Miller was always more focused on his customers and technological advances in orthopedics than on Wall Street,” says Raj Denhoy, vice president and senior medical technology analyst with Piper Jaffray & Co. (Minneapolis). “In the end, that’s what probably led to his sudden departure from the company he founded and led for almost 30 years.” Denhoy, who referred to Miller as “the senior statesman of the orthopedics industry,” characterized the sudden resignation as “hugely shocking.”

Analyst Engelhardt: Lamenting the ‘last of a breed.’

John Engelhardt, CEO of Knowledge Enterprises Inc. (Chagrin Falls, OH) and founder of the Institute for Orthopaedics, described Miller’s departure from Biomet as “the biggest event since we began tracking industry developments in 1992.” Engelhardt, who publishes the OrthoKnow and BareBones newsletters, concurs with speculation about a rift within the company’s management. “Dane Miller would never have left the company the way that he did unless there was a major disagreement about its present course and future direction,” he says. Describing Miller as “the last of a breed . . . an orthopedics guy running an orthopedics company,” Engelhardt added, “The industry is increasingly run with a focus on marketing, sales positioning, and stock value.”

In the aftermath of his resignation, Miller was indeed faulted by some analysts for focusing too much attention on product engineering and technology at the expense of marketing and sales. Yet, at the same time, many of the same analysts were quick to note that Biomet’s product-centric focus is generally credited as the reason the company has one of the highest product-loyalty rates among orthopedic surgeons.

Biomet’s Hann: Exploring alternatives.

Shortly after announcing Miller’s departure, the Biomet board reported that it had retained the services of financial services firm Morgan Stanley (New York City) to explore “strategic alternatives.” The announcement has led to widespread speculation that the company may now be for sale. “We believe that this review is a prudent exercise and is consistent with management’s commitment to our shareholders and team members,” said interim president and CEO Hann.

Although analysts have frequently mentioned Medtronic Inc. (Minneapolis) as a potential suitor for Biomet, Engelhardt said such a purchase is highly unlikely. “Medtronic is only interested in top-tier players in any segment,” he said. “They don’t buy the number five company.” Denhoy concurred, stating, “A Biomet acquisition would not be in line with Medtronic’s growth objectives.”

Biomet manufactures a wide range of orthopedic products, including joint replacement devices, bone cements, and accessories; dental reconstructive implants; internal and external fixation products; electrical bone-growth stimulators; craniomaxillofacial implants and bone substitute materials; spinal stimulation devices, spinal hardware, and orthobiologics; and arthroscopy products and soft-goods bracing. Biomet products are available in more than 100 countries.

With 6100 employees worldwide, Biomet reported annual revenues of $1.9 billion for the year ending on May 30, 2005, an increase of 19% over year-earlier sales of $1.6 billion.

© 2006 Canon Communications LLC

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