Zimmer Biomet's Turnaround Titan Jumps Ship for 3M

Zimmer Biomet's transformation over the past five years is one of the best medtech turnaround stories in recent history. Now, the CEO responsible for righting the ship is ready for a new voyage - and so is the company.

Bryan Hanson abruptly stepped down Tuesday to lead 3M’s healthcare spinoff.

"Today is an exciting day for me personally and professionally. It’s also a little bittersweet," Hanson wrote in a LinkedIn post Tuesday afternoon. "On one hand, it is tough to say goodbye to the team at Zimmer Biomet. For the past five years, we have made great progress leading to new breakthroughs for patients. On the other, I could not be more excited to be joining 3M and advancing our journey forward to becoming a leading independent medical technology innovation company. I have long admired what 3M does, and specifically the work the team does to bring science to life for patients around the world."

Zimmer Biomet appointed Ivan Tornos as president and CEO, effective immediately. Tornos has served as chief operating officer at the company since 2021, but he joined ZB in 2018 as the group president of orthopedics. The company also expanded CFO Suketu “Suky” Upadhyay role to include full responsibility for overseeing the company’s global operations and supply chain functions. Upadhyay joined the company in 2019.

In addition to hiring Hanson to help navigate the new healthcare company, Carrie Cox will join as chairman of the board after the spinoff is complete.

"Carrie is an industry veteran and her expertise will help me and the team deliver the most value to those who count on us around the world," Hanson wrote. "We are going to create something special that will deliver better, smarter, and safer healthcare."

Zimmer Biomet's transformation voyage 

Zimmer Biomet's transformation under Hanson's leadership cannot be overstated. To fully appreciate the legacy he leaves behind, we must look back at where the company was when Hanson took the helm in December 2017.

The company had been struggling with quality control and supply chain problems since December 2016. Investors became frustrated and former CEO David Dvorak stepped down in July 2017.

In April 2018, after gaining better clarity on where Zimmer Biomet needed to improve, Hanson said it would take two years to turn the company around and return to positive market share growth. Hanson navigated those efforts almost flawlessly, keeping Zimmer Biomet's transformation on course and, in some respects, ahead of schedule.

During 2019 the company not only earned back trust from its customer base but also began to win new business. It was also an important year for Zimmer Biomet's pipeline and commercial strategy as the company launched new products in the knee implant market along with the launch of knee, spine, and brain applications for its Rosa robotic system.

Also during 2019, ZB aggressively veered toward enabling technology such as robotics, mini robotics, informatics, and operating room efficiency.

"Although the implant will always be at the center of what we do, our goal is to provide a complete ecosystem that is both customer- and patient-centric," Hanson said during an earnings call that year.

Perhaps the most impressive aspect of Zimmer Biomet's transformation was across at a company culture level. Zimmer closed on its $14 billion Biomet acquisition in June 2015, but the workforce still saw itself as two organizations rather than one integrated company until Hanson came along. That's when Zimmer Biomet was truly born (analysts and reporters may recall Hanson firmly correcting them any time they referred to the company as just "Zimmer").

To use the words of one voter in the 2019 Medtech Company of the Year survey, "Bryan Hanson [did] one hell of a job in uniting and transforming the Zimmer Biomet conglomerate."

Addressing the culture and execution challenges was the first of three phases of Zimmer Biomet's transformation over the past five years. The second phase was a more robust, longer-term strategy. The third phase was portfolio transformation, which included the spine and dental spinoff that created ZimVie.

"For us, it was sequential," the turnaround titan said during an earnings call in February 2021. "We wanted to make sure that phase one in our transformation was in great shape, and it is. Phase two would need to be well underway before we want to take something like this on. And I think based on our performance over the last few quarters versus our competitors, it's pretty clear that phase two is working quite well. And now's the time. It's time for active portfolio management."

And that's why we call him the turnaround titan.

What to expect from ZB's next voyage

Ryan Zimmerman, a medtech analyst at BTIG, noted in a report Tuesday that the timing and abruptness of Hanson's departure will likely raise questions for investors, even though the company reaffirmed its fiscal 2023 guidance.

"The spinoff of 3M is of similar size to [Zimmer Biomet], so investors naturally wonder, 'why take on that role if it's not substantially larger?' That said, we caught up with Mr. Tornos this afternoon and come away optimistic as he assumes the new CEO role."

Zimmerman pointed out that Hanson was nearing the end of what he wanted to accomplish in terms of Zimmer Biomet's transformation, after improving the company both operationally and financially.

It's important to note that Tornos was essentially the ship's first mate during Zimmer Biomet's transformation voyage, so perhaps it makes sense that he steps up to the helm to lead the company's next voyage.

"Honored, humbled, grateful, and ready to lead the most amazing team in the universe as we continue to move our mission forward," Tornos wrote in a LinkedIn post Tuesday. "Our ZB family is positively disrupting the way patient care is delivered literally one patient at a time. Every eight seconds we impact someone’s life……and we are just getting started! Boldest ahead. Come on, let's go!"

Zimmerman speculates that with Tornos taking the helm, ZB could use the opportunity to focus on portfolio optimization through M&A while also improving its margin structure as supply chain improves.

"In our view, Mr. Tornos brings increasing focus to the role," the analyst wrote, adding that he expects little to change strategically.