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Advanced Medical recalls lens solution; stock sinks

November 22, 2006|From Bloomberg News

Santa Ana-based Advanced Medical Optics Inc. on Tuesday recalled 2.9 million bottles of its Complete MoisturePlus contact lens solution after harmful bacteria were found in some units sold in Japan. The company's shares fell 8.9%.

The voluntary recall is a precaution against eye infections caused by water-borne bacteria that infiltrated a plant in China, Advanced Medical said. The recall mainly covers bottles sold in Asia, where fewer than 10 complaints have been filed about the nonsterile solution, a company spokeswoman said. No problems have been reported in the U.S., which gets most of its shipments from a plant in Spain.

Advanced Medical said profit and revenue this year and next would be lower than expected after inventory reductions and costs to recall stock and sanitize the plant. Analysts, saying the company may also face longer-term issues, cited the precedent of Bausch & Lomb Inc., whose profit plunged after its lens cleaner was linked to a potentially blinding fungal infection.

"We expect an impact to other parts of the Advanced Medical business that management has not included in its numbers," Marc Goodman, an analyst at Credit Suisse in New York, wrote in a note to clients.

Advanced Medical expects to pay as much as $40 million to write down inventory, fix manufacturing and expand marketing to win back customers after the recall. The company said sales through 2007 might fall by as much as $45 million as a result of product returns, supply shortages and loss of market share.

Competing lens cleaners such as those made by Alcon Inc. in Switzerland probably will win over, and keep, the customers who can't get Advanced Medical's solutions during the recall, Goodman said in his note.

Alcon's shares rose $6.10, or 6%, to $107.79 on Tuesday. Shares of Advanced Medical fell $3.50 to $35.75.

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