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MNT
Mentor Corp.

7/10/2014, 3:28 AM ET
Quote & Analysis StockTalk Description
Country: United States
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Mentor Corporation was incorporated in Minnesota in 1969. Our fiscal year ends on March 31, and references to fiscal 2008, fiscal 2007 or fiscal 2006 refer to the years ended March 31, 2008, 2007 or 2006, respectively.

We develop, manufacture, license and market a range of products serving the aesthetic medical market, including plastic and reconstructive surgery. Our products include breast implants for plastic and reconstructive surgery, capital equipment and consumables used for soft tissue aspiration for body contouring (liposuction), and facial rejuvenation products including various types of products for skin restoration. Historically, we operated in three reportable segments: aesthetic and general surgery, surgical urology, and clinical and consumer healthcare. In June 2006, we sold the surgical urology and clinical and consumer healthcare businesses. We currently operate in one business segment — aesthetic products.

Principal Products and Markets

Our aesthetic products fall into three general categories: breast aesthetics, body contouring, and other aesthetics which includes facial aesthetics products. These three product lines are considered one segment for financial reporting purposes.

We develop, produce, and market a broad line of breast implants, including saline-filled implants and silicone gel-filled (MemoryGel™ and Contour Profile® brand) implants. Our breast implants consist of a silicone elastomer shell that is either filled during surgery with a saline solution or pre-filled during the manufacturing process with silicone gel. Our MemoryGel™ breast implants incorporate silicone gel with varying degrees of cohesiveness. Additionally, our implants have either a smooth or textured surface and are provided in a variety of sizes and shapes to meet the varying preferences and needs of patients and surgeons.
Breast implants have applications in both cosmetic and reconstructive plastic surgery procedures. These implants are used in augmentation procedures to enhance breast size and shape, correct breast asymmetries and help restore fullness after breast feeding. During reconstruction procedures, breast implants are utilized as a surgical solution to create a breast mound following a mastectomy. Breast reconstruction is a surgical option for many women following a mastectomy, either at the time of surgery or at a later date.

We estimate the size of the markets for our products using external data and management judgment. We believe the worldwide breast aesthetics market to be approximately $800 million to $850 million per year. We work actively with FDA as we seek approvals of our pre-market approval applications and our biologic license applications, as well as when we carry out our post-approval conditions. We also work with non-U.S. agencies related to these processes. Following are some key dates related to these activities: During the third quarter of fiscal 2008, we began enrollment of our botulinum toxin type A Phase IIIb study for the treatment of glabellar rhytides (frown lines). Enrollment was completed in January 2008. In February 2008, we began enrollment for our Phase IIIc study, and enrollment was completed in April 2008.

In February 2008, FDA approval was received for Prevelle™ Silk, a hyaluronic acid dermal filler containing lidocaine that is manufactured by Genzyme Corporation and distributed by us. Our MemoryGel™ breast implants have been approved by FDA subject to post-approval conditions, including a Post-Approval Study (PAS). To date, we have enrolled over 33,000 patients toward the PAS enrollment goal of 42,900 patients. We anticipate concluding enrollment by the end of calendar year 2008.

Our Contour Profile Gel™ breast implants submission was filed with FDA in September 2006 and is under review by the agency. We carry a full line of breast reconstruction products including the Contour Profile Tissue Expander (“CPX™”) family of breast expanders. These expansion products, used in the first-stage of a two-stage breast reconstruction, create a pocket that will ultimately hold the breast implant that is placed in a second-stage operation. All CPX devices utilize our proprietary, self-sealing BufferZone®™ technology and Centerscope™ injection port locators.

We offer a line of extremity tissue expanders. Extremity tissue expansion involves the process of growing additional tissue for reconstruction and skin graft procedures. Some common applications for extremity tissue expanders include the correction of disfigurements such as burns, large scars and congenital deformities.

With respect to body contouring, we market a complete line of liposuction products and disposable supplies. We estimate the worldwide market for body contouring products to be approximately $40 million to $65 million per year. Our “other aesthetics” category includes Mentor Solutions and facial aesthetics. The Mentor Solutions group offers software, consulting and business management tools to help plastic surgeons grow their business. In facial aesthetics, we supply dermal filler products and cosmeceutical products that help plastic surgeons and dermatologists treat a variety of skin conditions. We estimate the worldwide market for dermal filler products to be approximately $700 million to $800 million per year. Currently, in the U.S. we sell Prevelle™ Silk, a hyaluronic acid-based dermal filler with lidocaine that is manufactured by Genzyme and is used for the correction of facial lines and wrinkles. Outside of the U.S., we sell the following dermal filler products: (a) Puragen Plus™, our double cross-linked hyaluronic acid-based dermal filler with lidocaine; and (b) Prevelle™, a hyaluronic acid-based dermal filler without lidocaine that is manufactured by Genzyme. These products complement each other by offering treatment options for a wide variety of patients looking for wrinkle correction. We continue to pursue FDA approval for Puragen Plus in the U.S. and for Prevelle Silk in certain territories outside of the U.S. In addition, as part of our commercialization agreement with Genzyme, we are pursuing FDA approval of dermal gel extra, a “next-generation” hyaluronic acid-based dermal filler product.

Our cosmeceutical products are the NIA 24™ line of science-based products that are used to improve and restore the healthy appearance of the skin, which we distribute pursuant to an agreement with Niadyne, Inc. Most of our sales take place in the U.S., and the majority of such sales are not subject to reimbursement by the government or third parties. Economic conditions can adversely affect the sales of our products, as described in the preceding sentence, because the end-users of our products may react to employment levels, energy and fuel costs, interest rates and other factors that can reduce consumer discretionary spending.
We are developing a botulinum toxin type A product utilizing proprietary technology. We estimate the worldwide market for botulinum toxin products to be greater than $1 billion per year, of which approximately 50% relates to therapeutic uses and 50% to cosmetic use. The only therapeutic indication that we are currently conducting clinical trials in is cervical dystonia (torticollis). We have completed our Phase I and Phase II studies for the treatment of glabellar rhytides (frown lines). The Phase III studies are comprised of three separate protocols, two of which were submitted to FDA as Special Protocol Assessments. The first is a single treatment safety and efficacy study, while the second is a repeat treatment safety and efficacy trial. The third study is designed to collect long term safety data over a three-year period. We have completed enrollment in all three of our Phase III studies. Additionally, in early fiscal 2007, we initiated the United States Phase I dose-escalation study focused on the treatment of adult-onset spasmodic torticollis/cervical dystonia. This study is now closed to enrollment.

Sales and Marketing

We employ a direct sales force domestically for our aesthetic surgery and facial product lines, as well as specialists to support our body contouring product line. The sales force provides product information training, data support and related services to physicians, nurses and other health care professionals. We promote our products through participation in and sponsorship of medical conferences and educational seminars, specialized websites, journal advertising, direct mail programs, and a variety of marketing support programs. One of our most successful marketing initiatives in fiscal 2008 has been our Mentor Masters Series, which is an ongoing educational event that allows physicians to visit our manufacturing facility in Dallas, Texas and see first hand how our breast aesthetics products are manufactured. We are currently the only company that manufactures breast implants in the United States. We employ rigorous quality standards carried out by our long-tenured staff. In addition, we support our physicians and their staff through ongoing education at our Mentor Paragon Forum educational events. These educational symposia are hosted around the globe and feature leading experts on the latest developments and techniques in breast aesthetics surgery.
In February 2008 we launched a new consumer website under the domain name LoveYourLook.com. This website features unique educational tools and support forums to help consumers educate themselves on procedures and find qualified surgeons in their area. In addition, we recently signed a co-marketing agreement with Le Mystere, a manufacturer of high-end lingerie and bras designed specifically for patients undergoing breast surgery. We contribute to organizations that provide counseling and education for patients suffering from certain conditions (such as breast cancer survivors or breast reconstruction support organizations), and we provide our physicians with educational materials related to our products for use with their patients.

International Operations

We distribute most of our product lines to markets outside of the U.S., principally to Canada, Europe, Central and South America, and the Pacific Rim. Products are sold through our direct international sales offices in Canada, France, the United Kingdom, Germany, Spain, Italy and Australia, as well as through independent distributors in other countries. Total foreign net sales for continuing operations, (which are made through distributors and direct international sales offices) were $116.0 million, $84.2 million and $75.5 million, in fiscal 2008, 2007 and 2006, respectively. Other than sales made through our international sales offices, which are denominated in the local currency of the respective sales office, international sales are generally made in U.S. dollars.
In addition, we manufacture breast implants in the Netherlands, France and Mauritius. During fiscal 2007, we recorded a $2.6 million impairment charge related to our decision to close our manufacturing and research facility in Scotland. Total long-lived assets, excluding those related to discontinued operations, located in foreign countries were $86.1 million and $21.5 million as of March 31, 2008 and 2007, respectively.

On July 2, 2007, we purchased all of the outstanding shares of Perouse Plastie SAS (“Perouse”), a medical device company based in Bornel, France. Perouse is a manufacturer and distributor of silicone gel breast implants for a number of established and emerging international markets and sells its products under the Perouse Plastie Perthese® brand. Perouse’s primary manufacturing facility is located in France and a second facility is located in Mauritius.