Implant Approval Buoys Allergan, Mentor

Investors and doctors cheer expanded use of silicone breast implants, but critics contend they're unsafe.
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Updated from Nov. 19.

Allergan

(AGN) - Get Report

and

Mentor

(MNT)

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.

The FDA said implants "are not lifetime devices," adding that "a woman will likely need additional surgeries on her breast at least once over her lifetime." Women with implants will need routine screening via magnetic resonance imaging machines. The implant's labels call for the first MRI to be given three years after initial surgery and then every two years.

"The cost of MRI screening over a woman's lifetime may exceed the cost of her initial surgery and may not be covered by medical insurance," the FDA says. If the MRI shows that the implant has ruptured, "the implant should be removed and replaced, if needed," the FDA says.

For many years, U.S. women have been allowed to receive cosmetic breast implants that contain saline solution. But plastic surgeons and implant-makers say women prefer implants with silicone vs. salt water because the gel-filled devices provide a more natural look and feel.

Approximately 300,000 women had breast-augmentation surgery last year, said two major plastic-surgery physicians' groups, the American Society for Aesthetic Plastic Surgery and The American Society of Plastic Surgeons. Nearly 58,000 women had breast reconstruction in 2005.

Both groups cheered the FDA's decision, filling their websites with information about the ruling, clinical trials and the conditions set by the FDA. They note that more than 75 countries allow cosmetic silicone-gel implants. They said their members "have always advocated that science determine the availability of silicone implants, not emotion and special interests."

Critics, including the National Organization for Women and Public Citizen, lit into the FDA's decision as an example of politics over science. The FDA ruling "makes a mockery of the legal standard that requires 'reasonable assurance of safety,'" Public Citizen said in the wake of the move.

Both companies made quick use of Web sites, heralding the availability of the implants. "It's Approved," says the headline on a Mentor Web site, in which the "o" in "approve" is replaced by a photo of an implant.

"You Never Looked Smarter," says an Allergan-sponsored Web site featuring the picture of a young smiling woman next to such questions as "How Is Today's Silicone Different?" and "What Are My Options?"

In recent fiscal quarters, implant makers and the analysts who follow them have said implant revenue has been restrained because women were delaying cosmetic surgery until they had a choice beside saline.

At a recent health care conference sponsored by Credit Suisse, plastic surgeons "were very bullish on the silicone-implant market, confirming that many women have been waiting on the sidelines for this approval," analyst Marc Goodman wrote in a research note.

FDA clearance took a long time. An advisory group to the agency had supported an Inamed implant in October 2003, but the FDA rejected it the following January. In April 2005, a new FDA committee refused to back a silicone-gel application by Inamed, saying the company failed to provide "reasonable assurance" that the implant was safe.

Just a day after Inamed had its committee setback last year, FDA advisers

endorsed Mentor's silicone implant. A week before the votes, an FDA staff report criticized both companies for their safety data.

Then, in July 2005, the FDA granted conditional approval for Mentor's device, meaning the company had to meet certain criteria before it could start selling the implant. In September the same year, the FDA overruled its advisory panel on the Inamed implant and granted conditional approval.