Advanced Medical Optics: Shares Plummet on MoisturePlus Recall

Shares of Advanced Medical Optics slid almost 14% Tuesday, closing at $34.69 on 10 times their average volume, after the company voluntarily recalled its Complete MoisturePlus Multi Purpose contact lens solution and announced it is withdrawing its guidance for 2007 and 2008. The recall came after the Centers for Disease Control and Prevention [CDC] found a link between the product and a rare, serious cornea infection, acanthamoeba keratitis [AK]. The CDC found that the risk of developing AK, which can lead to vision loss and the need for a corneal transplant, is at least seven times higher among people who use MoisturePlus. MoisturePlus accounted for $105.7 million, or about 10%, of Advanced Medical's consolidated sales last year. In the wake of the recall, the company has withdrawn its forecasts of 2007 EPS of $1.40-1.55 on sales of $1.15-1.18 billion and 2008 EPS of $2.25-2.40 on sales of $1.35-1.37 billion. Analysts had been expecting EPS of $1.44 in 2007 and $2.22 in 2008. According to Lehman Brothers analyst Mathew Blackman, the recall could cut $0.50 from Advanced Medical's 2007 EPS and as much as $0.60-0.70 from 2008 EPS. In addition, the company's expressed interest in outbidding Warburg Pincus for Bausch & Lomb is now in question. Bausch's shares fell 3.7% to close at 67.90.

Sources: TheStreet.com, MoneyCentral, MLive, Bloomberg
Commentary: Advanced Medical Optics: Bounce Candidate Following MoisturePlus Recall • Advanced Medical Optics Considering Offer for Bausch & Lomb • Advanced Medical Optics: ValueAct Capital Discloses 7.3% Stake
Stocks/ETFs to watch: Advanced Medical Optics, Inc. (EYE), Bausch & Lomb Inc. (BOL). Competitors: Alcon Inc. (ACL). ETFs: iShares Dow Jones US Healthcare Provider (IHF), Vanguard Health Care ETF (VHT), Health Care Select Sector SPDR (XLV)

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