Covidien - Back on Top: An Interview with Richard Meelia

Article preview from In-Vivo - September, 2010

Is there a medical device company today doing better than Covidien? The company is making a huge splash building new businesses and shoring up existing ones. But Covidien, formerly Tyco, hasn't always had it so good. A corporate scandal in the early 2000s brought Tyco's corporate management down and scuttled the healthcare business' strategic plan. After years of sitting on the sidelines, Covidien is back, stronger than ever.

Covidien - Back on Top: An Interview with Richard Meelia

Article preview from In-Vivo - September, 2010

Over the past 15 years, Covidien has seen more than its share of ups and downs: a forced bankruptcy and the shadow of corporate scandal during the worst of times, and, on the positive, the creation of a hospital-supplies powerhouse. More recently, the company has used an aggressive M&A strategy to establish itself as one of the device industry's leaders.

Is there a medical device company today that, by any measure, is doing as well as Mansfield, MA-based Covidien Ltd.? Over the last three years, the company has been one of the industry's best performing companies and most active deal-makers, building major franchises in totally new target markets, such as peripheral vasculature, while securing a leadership position in its surgical devices/instrument business, one of its core franchises. Indeed, only Medtronic Inc. and St. Jude Medical Inc. have done more deals since 2008 than has Covidien, which has scooped up a number of companies, most recently peripheral vascular specialist ev3 Inc. [201010064] (Accounting for the large general stock market sell-offs of 2008 and midyear 2010, Covidien's stock has also outperformed most of the offerings of other large cap medical device companies since its spin-off IPO of early 2007.) [200230052]

But Covidien's current streak raises an even more interesting question: is there a top device company today that has come as far as Covidien in reaching its current prominence? In fact, there isn't one Covidien, but really four or five (under a variety of different names) and each of the company's iterations has had its own story to tell. Beginning as Kendall, the wound care giant, the company has gone through a leveraged buyout and forced bankruptcy, a buyout by a large industrial conglomerate, Tyco International, which ushered in a period of extraordinary M&A activity in the late 1990s – activity that enabled the company build a powerhouse in hospital supplies – only to be brought low just a couple of years later by the financial scandals that roiled its parent company. [199410139] But where most companies might have just given up, Covidien perservered, under the leadership of CEO Richard Meelia, a former American Hospital Supply Corp. executive who took the reins just before the scandal hit. 

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