Bausch & Lomb’s decision to discontinue its sales of ReNu MoistureLoc
contact lens solution could deal a devastating blow to the company’s earnings estimates and give a boost to certain competitors, according to Banc of America analyst David W. Maris.
The collateral damage for Bausch & Lomb (nyse: BOL - news - people ) could be "sizable,” says Maris. He believes competitors like Alcon (nyse: ACL - news - people ), Cooper Companies (nyse: COO - news - people ), Johnson & Johnson (nyse: JNJ - news - people ) and IntraLase (nasdaq: ILSE - news - people ) will likely benefit from greater market share.
Shares of Bausch & Lomb were down nearly 17% in Tuesday morning trading.
The company's decision followed a Food and Drug Administration warning on the product, citing a report by the Centers for Disease Control and Prevention that linked ReNu MoistureLoc with cases of an eye infection that could lead to blindness. Bausch & Lomb had already suspended sales of the solution in certain Asian regions after reports of similar fungal eye infections.
ReNu MoistureLoc generated sales of nearly $45 million last year. Taking the product off the market could cause a reduction in Bausch & Lomb's full-year earnings per share of 43 cents, says Maris. He adds that U.S. losses could translate into global losses as retailers around the world cut back on all Bausch & Lomb products.
The fallout could also erode the company’s brand equity not only in lens care, but in the contact lens business itself. Add to this any legal liability issues the company now faces, and the fallout could have a "material impact" on Bausch & Lomb for a foreseeable timeframe, says Maris.
The announcement comes as Bausch & Lomb faces potential new lens care and lens business competitors later this year. MoistureLoc alone has 9.2% market share in U.S. lens care solutions.
Maris maintains his “sell” rating and price target of $49 on Bausch & Lomb stock, preferring to wait until more information is provided by the company before altering estimates.