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Bausch & Lomb recalls eye treatment

Infection linked to lens solution; 'issues' at firm's plant

May 15, 2006 | Bausch & Lomb said Monday it is permanently recalling its ReNu with MoistureLoc contact lens solution worldwide after reports the treatment might trigger a rare eye infection.

In a related development, the U.S. Food and Drug Administration says it has found some irregularities at Bausch & Lomb's ReNu plant in Greenville, S.C., but said plant issues were not related to the outbreak of the affliction, known as Fusarium keratitis.

Bausch & Lomb's apparent proactive stance in the case seemed to help the company. Shares kept surging throughout the day, and ended the session higher by $5.64, or 12.7%, to $50.08.
But much of that could be because the company's stock has dropped precipitously as concerns over the issue heated up. With an apparent resolution, investors may be reasoning that the company can move on with only upside ahead of it.

Bausch & Lomb Chairman and Chief Executive Ronald Zarrella said the recall would cost the company $50 million to $75 million, plus $100 million or more in lost revenue. Further, the company would have to regain lost market share from the recall.

"You should think about 2006 as a rebuilding year because that's what I'm thinking of it," Zarrella said in a conference call with analysts.

He said ingredients in the solution reacted in certain environments that allowed the infection to spread. Noting that Fusarium can live just about anywhere, Zarrella called the confluence of events a "perfect storm," involving climate and setting as well as the solution.

"Fusarium is ubiquitous and it is especially prevalent in warm and humid climates," he said.

Plant issues

Dr. Daniel Schultz, director of the FDA's Center for Devices and Radiological Health, said that after the FDA conducted its investigation of the matter, it discovered "issues related to good manufacturing practices" with Bausch & Lomb's Greenville plant. Those issues would be discussed within the next few days, he said, but were unrelated to the infection.

"At this time there is no link between those findings and this particular outbreak of Fusarium," Schultz said.

Zarrella said he does not expect the FDA's findings regarding the Greenville plant to interrupt operations.

"It won't affect our ability to operate the plant," he said. "We've been able to correct many of the [FDA's] observations as we went through."

Health authorities in Hong Kong, Singapore and the U.S. reported patients who contracted Fusarium keratitis were using MoistureLoc. Bausch & Lomb said that prompted a "massive investigation."
Concerns over Fusarium heated up over the last several months as additional cases of the outbreak continue to be reported. There now are 155 confirmed cases.

$100 million in sales

Introduced to the market in 2004, ReNu with MoistureLoc accounted for roughly $100 million in sales for Bausch & Lomb last year.

Analysts remain concerned that Fusarium cases may cause further damage to sales of Bausch & Lomb's ReNu with MultiPlus and MultiPurpose. Some Fusarium cases have cropped up with users of that product, the Centers for Disease Control has said.

Zarrella said he doesn't believe the two solutions are spreading the infection. Fusarium hasn't appeared in markets where MoistureLoc is not sold, such as Japan. He added small samples of MoistureLoc have been included with MultiPlus and MultiPurpose, possibly causing misreporting among patients.

FTN Midwest analyst Christopher Cooley said in a note to clients that he was lowering his estimates on Bausch & Lomb shares to 47 cents below estimates for 2006 and 28 cents below estimates for 2007.

Analysts polled by Thomson First Call predict earnings of $3.24 and $3.77 for 2006 and 2007, respectively.

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