EV3 shares continue fall as CEO resigns

Shares of EV3 Inc. plunged 13 percent Monday after the Plymouth-based medical device company replaced its chief executive and cut first-quarter revenue guidance.

EV3, which makes stents, coils, balloons and catheters that treat vascular diseases, continues to experience difficulties integrating the operations of FoxHollow Technologies Inc., which it purchased in October for $780 million.

Monday's decline was especially painful for investors, who have seen EV3 shares drop 40 percent over the past year.

James Corbett, who has served as CEO since January 2004, resigned from the post, as well as from the chairman's and president's positions.

He was replaced by 20-year medical technology veteran Robert Palmisano as CEO and president. Board member Dan Levangie was named chairman of the board.

Reached Monday afternoon, Corbett declined to comment. Corbett is well-known in Twin Cities med-tech circles for having spent part of his career at SciMed Life Systems Inc., a signature local company that is now the cardiovascular division of Boston Scientific Corp.

EV3 said in a securities filing that Corbett's resignation "was not the result of any disagreement or other dispute with the company."

The bulk of Palmisano's experience has been in the pharmaceutical and ophthalmology areas -- different from the peripheral, vascular and neurovascular markets that dominate EV3's business.

Most recently, Palmisano was CEO of IntraLase Corp., a California-based ophthalmology laser technology company that was bought a year ago for $808 million by Advanced Medical Optics Inc. While CEO of Summit Autonomous, he sold the company to Alcon Inc. for $1 billion in October 2000.

"In EV3, I saw a company that is fundamentally sound in terms of product offerings and strategy," Palmisano, 63, said in an interview. "What we're all going to have to focus on is execution."

Palmisano will be paid a minimum annual base salary of $600,000 and can earn an annual bonus of up to 100 percent if he meets performance goals set by the board's compensation committee. In addition, he was granted options to purchase 1.05 million shares of EV3 stock at an exercise price of $8.64 a share. (EV3 shares closed at $7.50 on Monday.)

In a separate news release Monday, EV3 said first-quarter sales are expected to be about $101.3 million, about 5 percent below its prior estimate of $107 million. Analysts had expected revenue of $104 million, according to Thomson First Call.

The company said the revenue revision was the result of a slower-than-expected rebound following the acquisition of FoxHollow in U.S. sales of products that remove plaque from arteries.

The company also said it will revise its annual guidance for the year when it releases first-quarter results on May 2. That will be the third time in the past six months the company has revised its 2008 forecast.

Piper Jaffray & Co. analyst Thomas Gunderson acknowledged the integration of EV3 and FoxHollow has gone poorly, but he remains bullish about the company's long-term prospects. "Long-term, I'm a big fan," he said.

Janet Moore • 612-673-7752