Biotech Values

[DewDiligence]

Mentor Shares Hit All-Time Low

[An all-time low is not a great place to be when your business is breast implants—or anything to do with breasts for that matter. Nonetheless, MNT bears watching for its botulinum-toxin drug, which is in phase-3; the company recruited 700 patients in less than two months (#msg-26376850), which I found impressive.]

http://biz.yahoo.com/ap/080201/mentor_mover.html?.v=2

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Friday February 1, 6:53 pm ET

NEW YORK (AP) -- Shares of cosmetic surgery products company Mentor Corp. fell to an all-time low Friday over concerns the company is losing ground in the breast implant market to competitor Allergan Inc.

Shares fell $1.61, or 4.7 percent, to close at $32.77, having reached an all-time low of $31 earlier in the trading session.

Late Thursday, the company said its fiscal 2008 third-quarter profit met Wall Street expectations, but lowered its 2008 outlook. Analysts reaffirmed a positive long-term outlook for the aesthetics market even in the face of economic concerns, but pointed to Mentor's possible loss of market share in the breast implant market.

"In the long run, we believe in the overall strength of the aesthetic market," said Merriman Curhan Ford & Co. analyst Jose J. Haresco, in a note to investors. "While Mentor may ultimately benefit from a turnaround in the economy somewhere down the line, sequential quarterly losses in market share have convinced us that it will be difficult to out-muscle Allergan's marketing capabilities in the near-term."

Haresco downgraded Mentor shares to "Neutral" from "Buy," saying the stock is fairly valued between $26 and $32.

Mentor and Allergan have been competing over market share in the silicone breast implant market, both for new sales and for conversions from saline to silicone. On Wednesday, Allergan said its fourth-quarter profit increased and it expects continued growth in 2008 on Botox and breast implant sales.

Jefferies & Co. analyst Peter J. Bye, meanwhile, reaffirmed a "Buy" rating for Mentor, but lowered his price target to $45 from $55. He said Wall Street is likely undervaluing Mentor's growth prospects in the breast implant market, but still, the overall market will probably shrink in 2008, and Allergan will prove to be a tough competitor.

"We acknowledge that Allergan's increasing dominance of the aesthetics marketplace raises significant concerns for Mentor, among others," he said, but added the focus on share gains and losses might be overdone.

"In general, we think the solid conversion rate to premium-priced silicone implants and the overall market's favorable growth outlook, despite economic and procedure concerns, trump the importance of recent share gains by Allergan."

Wachovia Capital Markets analyst Larry Biegelsen reaffirmed a "Market Perform" rating with a price range of $35 to $36. Banc of America analyst Frank H. Pinkerton reaffirmed a "Buy" rating with a $46 price target.
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