For years, since 2003, I’ve considered Orthofix to be an undervalued, solid supplier in the musculoskeletal industry. In 2003, the company was headquartered in the Netherlands Antilles, Charlie Federico was CEO, and I had the pleasure of telling the Orthofix story and investment rationale to institutional investors in the United States and Europe.
Orthofix is no longer based in the Netherlands, Antilles (a legacy of its London, UK-based founders).
In 2006, I played a pivotal role in bringing a small, Springfield, Massachusetts-based spine company named Blackstone Medical to Orthofix. That led to many meetings with the board and management, and I had a chance to see, first hand, how solid and capable the Orthofix team was.
And the years rolled on. I started Orthopedics This Week. Orthofix has been a near fixture in the weekly Power Rankings of attractive, undervalued, top quality companies.
For sure, Orthofix had its difficult moments during those years. The parade of CEOs and CFOs to enter and exit the company after Charlie Federico left their mark—some positive, some not. There were compliance and regulatory issues. For a short period of time, OFIX’s balance was out of whack with its income statement.
But…the essential strength and character of this company never left.
When Brad Mason, who was Orthofix’s group president of North America when I first started writing about the company and was by 2019 the chief executive officer, turned the CEO job over to Jon Serbousek, Orthofix was at the top of its form—in every way.
Serbousek and his team, in turn, built on those strengths to tuck in several strategically important acquisitions. His crowning achievement was to bring in one of the fastest growing, best managed spine companies, SeaSpine, into the Orthofix family.
And with that acquisition came an extraordinary management team led by Keith Valentine.
Orthofix represented a solid platform upon which to grow for SeaSpine. By solid platform, I’m referring to the employee base that was built and nurtured under Mason, Serbousek, and the Orthofix culture that I spotted all those years ago.
Undervalued. Underappreciated. Yet, effective, reliable, and consistent. Like the practice of caring for musculoskeletal patients that the employees of Orthofix serve every day.
Firing Valentine, Bostjancic, and Keran – For Cause
No one saw this coming.
On Tuesday, September 12, 2023, Orthofix’s board of directors announced that they had terminated for cause three of the top executives in the world of spinal implant manufacturing: Keith Valentine, John Bostjancic, and Patrick Keran. Valentine was also asked to resign from Orthofix’s board of directors.
The announcement from Orthofix said, in part:
“Catherine Burzik, Chair of the Orthofix Board of Directors, has been appointed Interim Chief Executive Officer; Geoffrey Gillespie, Orthofix Vice President, Corporate Controller, has been appointed Interim Chief Financial Officer; and Puja Leekha, Orthofix Senior Vice President, Chief Ethics and Compliance Officer, has been appointed Interim Chief Legal Officer. The appointments are effective immediately and follow the unanimous decision by the Board’s independent directors to terminate for cause Keith Valentine, John Bostjancic, and Patrick Keran from those respective roles. The Board also requested that Mr. Valentine resign from the Board. The Board will immediately begin a search for permanent successors.”
“The Board’s decision follows an investigation conducted by independent outside legal counsel and directed and overseen by the Company’s independent directors. As a result of the investigation, the Board determined that each of these executives engaged in repeated inappropriate and offensive conduct that violated multiple code of conduct requirements and was inconsistent with the Company’s values and culture. These matters are unrelated to and do not impact the Company’s strategy, results of operations or previously filed financial statements.”
What happened?
The key phrases from the release…
- “Terminate for cause…”
- “Engaged in repeated inappropriate and offensive conduct…”
- “Investigation by independent outside legal counsel…”
- “Violated multiple codes of conduct…”
…left the unmistakable impression of an extreme lapse of judgement if not also character. So extreme that, by unanimous vote of the board of directors, the company went to DEFCON 3—in effect, the corporate amputation of its leadership.
The details behind these actions were left to the imagination of the reader.
Shortly after the announcement was issued, Board Members Stu Essig and Catherine Burzik held 12 ten-minute calls with Wall Street analysts and major shareholders to provide more color and, no doubt, to reassure their shareholders that the move was justified and that the interim managers had a plan and were executing it competently.
The requisite 8K filing regarding the material change in leadership with the Securities and Exchange Commission did not happen until Thursday, September 14.
Reverberations Throughout the World of Spine
I say this with sadness all around.
The news reverberated from stem to stern in the world of spine product distributors, surgeons, and engineers.
No one I’ve talked to believes that Keith Valentine, the now former president, and chief executive officer at Orthofix and 30-year veteran of Medtronic Spine & Biologics, NuVasive and SeaSpine, would ever have had such a serious lapse of judgement.
No one. To a man and a woman.
Here is the background of the two other senior executives who were fired.
John Bostjancic, who spent more than a quarter century in key executive positions in healthcare starting as senior associate at PricewaterhouseCoopers, then manager of Accounting Standards for Merck, followed a long career at Integra LifeSciences where he started as the senior director of Finance and progressed up through the ranks to senior vice president, Global Supply Chain. He joined the SeaSpine spin off as its chief operating and financial officer and then was chief financial officer at Orthofix.
Patrick Keran, whose 20-year career included serving as Orthofix’s chief legal officer and before that SeaSpine’s senior vice president, corporate development, and general counsel.
What happens next?
Wall Street immediately raised the risk profile of Orthofix, which affected the discount rate investors apply to OFIX’s future prospects. That pulled Orthofix’s market value down 26%.
The full details of what happened, from all sides, will come out eventually.
But, patients have their appointments, surgeries, and other interventions are scheduled, orders need to be filled and the company I came to know two decades ago, is still here, moving forward, delivering excellence every day.
