December 16, 2014
By Riley McDermid, BioSpace.com Breaking News Editor
The chief financial officer of massive pharmacy benefits company Express Scripts decided to leave the job after repeated clashes with CEO George Paz, an inside source told BioSpace Tuesday, and the uncertainty over where the company is headed in 2015 is making traders uneasy.
Express Scripts abruptly announced Monday that CFO Cathy Smith would leave the company, to be replaced by James Havel, CFO of Major Brands Holdings, on an interim basis, starting Jan. 2. The company said at the time only that she was leaving to “pursue other interests” but insiders have told BioSpace it was solely due to her inability to get along with Paz.
“We thought odd timing given Smith was only there for less than a year and was viewed positively by investors,” the source told BioSpace. “We talked to [Express Scripts] and they were brutally honest and said Smith and CEO George Paz simply didn’t get along.”
Both executives were making top-line salaries at the company, which saw a rough year in 2014. Express Scripts laid off 400 employees, including 90 in St. Louis, in November, after blaming “lower prescription volumes and the loss of clients.”
Meanwhile, both Smith and Havel’s base salary is $725,000, with Havel receiving a signing bonus of $110,000, according to recent filing with the U.S. Securities Exchange Commission. Smith will receive an undisclosed amount of severance and other benefits.
Express Scripts can afford it—the firm saw income leap 36 percent to $582.3 million for quarter ended Sept. 30. Those numbers have reassured Wall Street, but some traders have been concerned about such an abrupt C-level shakeup.
“This change in senior management creates some instability ahead of full year 2015 guidance,” said Sean McDermott, a trader with ISI/Evercore on Tuesday.
Analysts have agreed the company will have a tough task replacing Smith, particularly on the investor front, where she was well liked.
“The firm has tripled in size effectively over the past decade, so you have to have somebody who can run a complex, large organization such as Express (Scripts) and the CFO doesn’t necessarily have to have a medical background,” Vishnu Lekraj, an analyst with Morningstar, told St. Louis Today.
