Implant Approval Buoys Allergan, Mentor

Updated from Nov. 19.

Allergan(AGN Quote) and Mentor(MNT Quote) saw their shares jump Monday after both won long battles to start selling silicone-gel breast implants for cosmetic purposes.

The Food and Drug Administration cleared the implants late Friday for women at least 22 years old, saying the "extensive body of scientific evidence provides reasonable assurance of the benefits and risks of these devices."

Silicone implants have had severe restrictions placed on them in the U.S. since 1992 and have been used only for replacing silicone implants that have ruptured, breast reconstruction after mastectomies and correcting congenital deformities of the breast.

The implants have, however, been available in many foreign markets as cosmetic options.

Following the FDA's decision, shares of Mentor climbed $4.63, or 9.7%, to $52.21. Implants account for a large part of the company's sales. The much larger Allergan, whose products also include Botox and eye-care drugs, gained $7.28, or 6.5%, to $119.78. Volume was heavy in both stocks.

The Allergan implant was made by Inamed, a company acquired by Allergan earlier this year.

Even before the FDA acted, analysts had predicted there would be considerable pent-up demand for cosmetic silicone-gel breast implants, despite the fact that the devices will carry many warnings and restrictions and probably won't be covered by insurance.

"The conditions for approval do not seem too onerous in our view, and, in general, should not be surprising to investors," says Gary Nachman, of Leerink Swann, in a research report to clients.