Silicone breast implants may soon be back
Allergan and Mentor are both poised to profit if the FDA does lift its 14-year ban.
By Aaron Smith, staff writer

NEW YORK ( -- For the first time since 1992 - the year Bill Clinton was elected, John Gotti was convicted and Los Angeles spiraled into riots - silicone breast implants may once again be available in America.

Allergan (up $2.05 to $113.90, Charts), which owns breast implant maker Inamed, and rival implant maker Mentor Corp. (Charts) are both trying to get silicone implants back on the U.S. market. They've each filed applications with the Food and Drug Administration for new, improved implants, and now they're waiting to see if the agency will lift its 14-year silicone ban.


There seems to be little doubt that the FDA will ultimately approve the silicone-filled implants, which could double the $350 million U.S. market for implants, currently dominated by saline. The question is exactly when, and how.

The FDA banned silicone implants for most women back in 1992 because of growing concerns about ruptured shells and leaking gel. Since that time, only women requiring postmastectomy reconstructive surgery have been permitted to use silicone-filled implants in the United States. Women who want implants for cosmetic purposes have had to be content with the less popular saline-filled implants, or willing to jet off to the thriving silicone markets in Europe and South America.

Allergan and Mentor, both based in California, currently sell silicone implants to overseas markets, but the international arena only accounts for about a quarter of the companies' implant sales.

Allergan and Mentor each received "approvable" letters last year from the FDA, a step in the regulatory process that is generally seen as a move toward final approval in the United States. Since then, analysts and insiders have been trying to guess when the agency will make its final decision, and there are bold signals that approval could come this year.

"I think it's imminent," said Amit Hazan, analyst for SunTrust Robinson Humphrey. "The companies have been in discussions with the FDA [about] conditions for approval, and my impression is that the discussions are pretty much over, that the FDA has gotten everything it needs."

Hazan said that a finding on July 31 by a Senate committee is the strongest sign yet that FDA approval could happen any day. After a 10-month investigation, the Senate Health, Education, Labor and Pensions Committee vetted the FDA's recent review of the new applications for silicone implants from both Allergan and Mentor. This finding clears the way for the FDA to make its decision.

"To me, that means the Senate has given a green light to the FDA to approve the product," said Hazan.

Approval this year?

Spokespersons for Allergan and Mentor declined to discuss with their dealings with the FDA or to provide any sales estimates.

But Aaron Gal, analyst for Sanford C. Bernstein, said that Allergan and Mentor have both included revenue from silicone implants in their earnings estimates for 2006, a sign that the companies are confident they'll have the products on the U.S. market within months.

"Both companies are guiding that they will get approval before the end of the year," said Gal. He estimates that Mentor and Allergan will each total about $200 million in silicone implant sales in 2007, in addition to $140 million each in saline sales.

Approval would most likely result in a stock price spike for both companies, analysts say, with the biggest bump going to Mentor, since its business is more heavily dependent on implants than Allergan, which also sells wrinkle remover Botox and is developing the dermal filler Juvederm.

Allergan has also submitted a more advanced type of breast implant with the FDA, called Style 410 and nicknamed "Gummy Bear." Style 410 is composed of numerous gel pieces that are clustered together like the rubbery candies, and its approval could result in more sales for Allergan and make the company more competitive.

Gal said that Mentor, currently trading at about $47 per share, could see its stock price rise by $3 to $5 per share with the approval of silicone implants. In the past month, the company's price has jumped about 13 percent as investors anticipate FDA approval.

"With Mentor, 85 percent of their revenue is [breast implants]," said Jose Haresco, analyst for Merriman Curhan Ford. "That's why it matters so much to Mentor's stock that it gets approved. If it doesn't happen by the end of 2006, Mentor's stock is really going to get hurt."

Even if the FDA approves the implants right away, the agency might require the companies to do expensive follow-up checkups that could cut into profits, said Haresco. That might be the only way the FDA could justify putting silicone back on the market for the general population.

Unlike other analysts, Merriman's Haresco isn't so bullish about the FDA approving silicone this year.

"Everybody said it's going to happen in 2005, then everybody said it's going to happen in the first half of 2006, and now everybody's saying second half of 2006," said Haresco. "But I doubt that they would rush this. I am not one of the voices that's saying it's going to happen any day now. It'll happen when it happens."

The analysts interviewed for this story do not own stock in the companies mentioned here, though Merriman Curhan Ford does make a market in Mentor.

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