Too early to predict financial impact of fungal keratitis infection on contact lens care business

ROCHESTER, N.Y. — Bausch & Lomb officials say it is too early to predict what financial setbacks may be felt in the wake of reports that the recent Fusarium keratitis outbreak may be linked to Bausch & Lomb’s ReNu with MoistureLoc lens care solution.

Bausch & Lomb announced Tuesday that it temporarily halted domestic shipments of the product pending the federal investigation of the rare but vision threatening infections that have been reported in soft contact lens wearers.

In an investor relations teleconference hosted by Bausch & Lomb Wednesday, Ronald L. Zarrella, Chairman and Chief Executive Officer, said the Centers for Disease Control and Prevention (CDC) has been conducting an investigation at the company’s Greenville, S.C., manufacturing plant for 3 weeks. Mr. Zarrella said the investigation is expected to be finished at the end of the week.

“We are in constant contact, sharing the results of our ongoing testing, and so far, as reported, no cause associated with ReNu with MoistureLoc has been found,” he said. “Our first priority is consumer health and safety, and that is why we have taken the action we did. But we are obviously also concerned about the financial impact of these events on our business.”

Bausch & Lomb reported that last year’s U.S. sales of ReNu with MoistureLoc was approximately $45 million.

“At this point we simply can’t predict the impact of these events on 2006, because it depends on the course of events,” he said. “We don’t know how long it will take to conclude the investigation so we can resume shipments, and we haven’t yet begun to estimate at this point the ripple effect that all this negative publicity will have on other ReNu products or other geographic markets.”

According to a Bloomberg report, Bausch & Lomb stock decreased more than 16% — the biggest decrease in 5 years — following their announcement to suspend shipping.

Although the product has not been recalled, individual vendors, including Wal-Mart Stores Inc., Walgreen Co., and Rite Aid Corp., pulled the products from the shelf after the CDC announced it had received 109 cases of reported fungal infections, according to the Bloomberg report.

Mr. Zarrella said the company is working aggressively on brand-building actions in hopes of regaining market shares as soon as possible.

“We have to determine the full-on effect of all this publicity to all our other lens care brands and the effects, if any, onto our contact lens business,” he said. “Once we get a little time under our belt, we’ll have a better estimate of what the effect of all this will be.”