Quest Diagnostics' ($DGX) board is trying to find a successor to outgoing Chairman and CEO Surya Mohapatra, forming a committee and engaging a leading executive recruitment firm to aid in the search.
Mohapatra joined the company as COO in 1999 and became president later that year. He was appointed CEO in May 2004. Mohapatra will serve for up to 6 months to ensure a smooth transition.
"Under Surya's leadership Quest Diagnostics has established itself as a patient-focused healthcare company," said Daniel Stanzione in a statement. "It has built an engine for growth in esoteric and gene-based testing, focused on the critically important areas of cancer, cardiovascular disease, infectious disease and neurological disorders. The company has a solid foundation for the future, and will continue to focus on delivering strong operating performance and increased shareholder value while we progress through this transition. The company and the healthcare industry have benefited greatly from Surya's leadership and vision."
However, Quest's stock rose on the news of Mohapatra's departure. "Some of the investments made under his leadership have turned out to be controversial," Thomas Gallucci of Lazard Capital Markets says in a note, according to Bloomberg. "Investor sentiment will likely greet news of change favorably."
And as Jefferies analyst Arthur Henderson notes, Mohapatra's departure comes as laboratory service providers face increasing pressure from managed care companies to reduce testing costs and uncertainty surrounding healthcare reform. "We are at an inflection point here in healthcare services, in the lab services in particular," Henderson said, as quoted by Reuters.
The news also led to speculation that Quest could be a takeover target--particularly for rival Laboratory Corp of America. Quest saw its net income decline to $171.8 million during the most recent quarter from $198 million during the same period last year.