It wasn't exactly a surprise, Johnson & Johnson's ($JNJ) choice of Vice Chair Alex Gorsky to succeed William Weldon as CEO. Gorsky has been one of the two apparent front-runners for the job ever since he and Sheri McCoy were elevated to their current roles in December 2010. But McCoy was considered in some circles to be the favorite for the top job. And Gorsky's appointment raised questions even as analysts hailed him as "the natural choice."
Gorsky has spent most of his business career at J&J, apart from a four-year stint running Novartis' North American pharma business. So he's an insider, a known quantity, and one investors are familiar with, Miller Tabak's Les Funtleyder told The New York Times. Funtleyder considered Gorsky to be the lead horse in his race with McCoy. "There is a comfort level with him," Funtleyder told the NYT. What's more, he's seen as a "force for stability," Bloomberg notes, going on to quote Wells Fargo analyst Lawrence Biegelsen: "We do not anticipate significant changes in J&J's strategic direction under his leadership."
Gorsky has also been running the device side of the business since 2008, and he's been in charge of supply-chain and quality processes since he took the vice chair's role. As Bloomberg points out, these jobs make him well acquainted with J&J's long series of recalls--including a particularly ugly one involving DePuy orthopedic implants. One of The Wall Street Journal's sources suggested Gorsky's supply-chain expertise may have helped tip the balance in his favor. Gorsky "has more of an operations background," the source told the WSJ. Plus, he helped engineer the acquisition of devicemaker Synthes, J&J's biggest deal ever.
Gorsky's insider status and device experience aren't uniformly seen as pluses, however. The news of his appointment broke alongside a NYT story about internal emails discussing safety issues with a DePuy hip system, the latest in an ongoing litany of questions about the division's handling of device problems. Not only has DePuy instituted a very expensive hip-implant recall, but it also faces thousands of lawsuits over those hip replacements, as well as vaginal mesh implants, Bloomberg points out.
At least one analyst said the devices division has seen "challenging" times recently, but Gorsky hasn't been to blame. Still, Erik Gordon, a University of Michigan business professor, told both the NYT and Bloomberg J&J's choice of an insider, while traditional at the company, may not be the best move at a time like this. Bringing in someone "from outside the team that led the company into so much trouble" would demonstrate a break with the recent past, he said. "I think it's a big mistake," Gordon told the Times.
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Special Report: Johnson & Johnson/Synthes - Top 10 medical device deals of 2011