Inquiry Yields No Clues on Lens Cleaner Linked to Infections

Archives Admin · #1 (**permalink**) 04-13-2006, 11:40 AM

Trying to prevent a rush to judgment against its contact lens solutions, Bausch & Lomb said yesterday that despite weeks of research neither the company nor federal regulators had figured out how its ReNu With MoistureLoc cleaner might be linked to an apparent outbreak of a severe fungal infection among American contact lens wearers.

The company announced Tuesday that it had voluntarily halted shipments of the product from its Greenville, S.C., factory that day, although it was not halting sales. But numerous retailers took that action on their own yesterday, taking ReNu With MoistureLoc — and in some cases other products in the ReNu line — off their shelves.

The product accounts for only a few percent of Bausch & Lomb's sales. But "the real issue is collateral damage for the rest of the ReNu brand," said Joanne K. Wuensch, an analyst who follows the company for Harris Nesbitt Gerard.

Bausch & Lomb shares, which plunged 14.6 percent Tuesday, fell again yesterday — nearly 7 percent further, to $45.61, in heavy trading. Five analysts issued reports downgrading the stock Tuesday.

"There is such limited differentiation in lens care products that once a consumer switches, it may be difficult to lure them back," said Lawrence Keusch of Goldman Sachs, who changed his previous forecast that the shares would move in line with the rest of the market to a projection that they would fare more poorly.

Ronald L. Zarella, Bausch & Lomb's chairman and chief executive, said yesterday in a conference call with analysts that the company expected some spillover impact whatever the outcome of the investigation.

He said it expected to announce plans by the end of the week for advertising and marketing efforts addressing the fears of the nation's 30 million soft contact lens users. Analysts estimate that close to 10 million of them use Bausch & Lomb lens care products.

The halt in MoistureLoc shipments followed an announcement Monday by the federal Centers for Disease Control that 109 infections involving a potentially blinding fungus called Fusarium keratitis had been reported in the last 10 months in the United States and that a preliminary analysis of 30 of them strongly linked the outbreak to MoistureLoc. Of the 26 cases where consumers remembered which cleaner they had used, 21 said they had used ReNu cleaners exclusively and the other five had used them along with other products.

Similar infections linked to use of MoistureLoc were reported in Singapore in February, and sales were suspended there and in Hong Kong. But no problems have been reported with MoistureLoc manufactured for sale in Europe at the company's Italian factory or in China.

Although the United States statistics strongly suggest a product-related problem, the numbers are so low that no one is sure whether Fusarium infections are actually on the rise or are merely getting more attention. More cases are being reported in Northern states, where they have been rare in the past, but some researchers say that could reflect climate change rather than product defects. Consumers are being advised to rub their lenses with the cleaner rather than just rinsing them, which is the common practice.

In the conference call yesterday, Mr. Zarella said that inspectors from the Food and Drug Administration had been combing the Greenville plant for three weeks looking for ways that MoistureLoc could have been contaminated. He said that effort, fruitless so far, was expected to end this week.

The call did little to assuage analysts' concern with how the investigation will play out. Their anxiety was compounded by Mr. Zarella's terse announcement at the beginning of the call that the company would further delay its previously postponed year-end 2005 earnings report to the Securities and Exchange Commission.

Last month, citing a number of accounting issues it was investigating, Bausch said the report would be filed by April 30. Mr. Zarella declined to set a new deadline yesterday or to explain the added delays.

Mr. Zarella said that MoistureLoc, which was introduced in the fall of 2004, accounted for $45 million in revenue for all of 2005. The company, based in Rochester, reported sales of $1.75 billion in the first nine months of the year in its last public earnings filing.

So far Bausch & Lomb has refused to take back shipments of the solution already delivered to customers. But Mr. Zarella said that the company would accept returns if the uncertainty was not resolved "in a reasonable period of time."

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Inquiry Yields No Clues on Lens Cleaner Linked to Infections

Contact Lenses