A federal advisory committee will soon recommend if silicone gel-filled breast implants should return to the U.S. market, 13 years after they were blocked for all uses except a few procedures such as reconstructive surgery for women who have undergone mastectomies.
For three days starting April 11, an advisory panel of the Food and Drug Administration will review product applications from Mentor (NYSE:MNT - News) and Inamed (NasdaqNM:IMDC - News). Analysts say a victory for one at the expense of the other would provide a significant boost to the winner in the cosmetic surgery market.
But there's much more to silicone implants than discussions of sales and market share. One big question: How will the FDA react in a climate affected by such controversies as Merck's (NYSE:MRK - News) withdrawing of the arthritis drug Vioxx or the use of antidepressants among adolescents that led to the FDA's ordering the most strict warning labels on these drugs?
As befits the passions surrounding silicone implants, the first day of hearings will be devoted solely to comments from the public.
"Don't let the silicone implant industry mislead Congress and the FDA into approving silicone implants for general use," says the National Organization for Women, in a recent message posted on its Web site. "They are simply too risky."
NOW and the consumer group Public Citizen have vigorously opposed silicone implants in the past via petitions and testimony to the FDA. "The risks facing women with silicone implants are real and they are serious," NOW says.
"If we talk about the device alone without the political sideshow, it's a safe device," says Dr. James Wells, a former president of the American Society of Plastic Surgeons. "This implant has been studied more than any device on record," said Wells, a plastic surgeon based in Long Beach, Calif. "It's been looked at, dissected and re-looked at." Although no drug or device is free from risk, he adds, silicone implants should be allowed on the market if the product is deemed safe and patients are well-informed about risks and benefits.
Economic Impact
The advisory panel's ruling "could have significant earnings implications for both companies Mentor and Inamed in the 12 to 18 months following the FDA's final decision," says Oppenheimer analyst Juan V. Noble in a recent report to clients.
The FDA isn't bound by advisory panels' suggestions, but it usually follows their recommendations. In January 2004, however, the FDA rejected an Inamed application even though an advisory panel voted 9-6 a few months earlier to support the Inamed implant.
Simultaneous approval would help both companies, Noble says, because each silicone implant would represent a 50% increase in revenue -- $1,200 vs. $800 -- over each saline implant. Most U.S. breast augmentation procedures use these saltwater-filled implants.
But if one company's silicone gel implant is approved and the other company's is rejected or delayed by the FDA's demand for more data, "the changes in each company's earnings outlook could be dramatic," Noble's March 14 report says. He predicts silicone implants, which some consider superior because of their more natural look and feel, could replace 50% of a company's saline implants within one quarter of an FDA ruling if only one implant maker received FDA approval. Resubmission of a rejected application could take a year.
Despite the current restrictions, the American Society of Plastic Surgeons says the number of cosmetic breast procedures by its members nearly doubled between 1998 and 2004. Last year, they performed 264,041 augmentations and 35,208 implant removals.
Noble has buy ratings on both companies. He doesn't own shares, and his firm doesn't have an investment banking relationship. His comments were issued shortly before Medicis Pharmaceutical (NYSE:MRX - News) made a $2.8 billion offer for Inamed, a bid that shouldn't affect Inamed's silicone implant application to the FDA.
Noble and other analysts shrugged off the recent announcement that the Securities and Exchange Commission is investigating Inamed's disclosure of rupture rates on one silicone implant. Noble says the implant in question produced $3.4 million in sales last year.
"We would not expect the penalty, if any, to be harsh," says Amit Hazan, of SunTrust Robinson Humphrey, in a report to clients earlier this month. Hazan has a buy rating on Inamed and a neutral rating on Mentor.
"Silicone looks like a negative for Mentor," Hazan says. "Our recent field checks with physicians leave us concerned." Hazan predicts Inamed's implant will be approved. "Mentor will have a tough act to follow" because the panel will examine Mentor's product the day after it votes on Inamed's implant, Hazan says. Hazan doesn't own shares in either company; SunTrust Robinson Humphrey is a market maker in Inamed's stock, and it owns more than 1% of Mentor's stock.
Breast implants accounted for 56% of Inamed's sales for the fiscal year ended Dec. 31 and 45% of Mentor's revenue for the nine months ended Dec. 31.
History and Controversy
It's also possible the FDA could reject both companies' applications, Noble says. These applications contain data on post-implant side effects that are "well short of the seven- to 10-year period over which some advocacy and medical groups assert negative side effects and complications can arise," he says.
Even though silicone implants are well-established in Europe and research shows no link to cancer or immune system diseases, "concern over longer-term complications is likely to persist," he says.
The most comprehensive research on silicone implants is a 1999 report from the independent Institute of Medicine. "Although studies do not show a risk of life-threatening illness from silicone breast implants, it is clear that they can cause serious problems," the institute concluded. "It is essential that women fully understand these risks before they decide to undergo this surgery."
Women with silicone breast implants are "no more likely than the rest of the population" to develop cancer, immune-system diseases or neurological problems, the Institute said. But complications can lead to surgery or other medical procedures. The most serious problems are infection, implant ruptures and the contracting of tissue around the implant.
The Institute is a private, nonprofit organization that provides health policy advice under a congressional charter granted to the National Academy of Sciences. The report was commissioned as lawsuits and controversy accelerated over silicone implants' safety. The most significant litigation involved Dow Corning, which dropped out of the implant business in early 1992 and filed for Chapter 11 bankruptcy protection in 1995 as a result of a flood of implant-related lawsuits. A U.S. bankruptcy court judge approved the company's reorganization in 1999 as well as a settlement fund for plaintiffs.
Silicone implants reached the U.S. market in 1962, but the FDA wasn't given authority by Congress to regulate them until 1976. Existing products were exempt from stricter demands placed on post-1976 products. In 1982, the FDA began a more detailed review of implants, responding to what the agency says were "some reports of adverse events in the medical literature."
By 1988, all new implants were subjected to the most stringent reviews for medical devices. And since April 1992, all implants, regardless of when they were sold, had to clear FDA review after adequate tests measuring safety and effectiveness. As a result, no silicone gel-filled implant has been approved for elective, cosmetic surgery. A woman can receive a silicone implant now if she is enrolled in a clinical study or an "adjunct study," which allows such implants for breast reconstruction, repair of implants that have failed or to correct congenital deformities of the breast.
The FDA said in May 2000 that certain saline implants were acceptable "despite relatively high complication and failure rates." The agency approved the products after reviewing five clinical studies from two manufacturers, adding that women should be made aware of risks.
Despite the complications, the FDA noted then that a majority of women still in the clinical studies after three years "reported being satisfied" with the implants. An FDA publication issued soon after the agency granted approval noted that saline implants "are believed to be safer than silicone because rupture or leakage will only release salt water -- not silicone gel -- into the body."
"I think FDA approval will occur," says Dr. Mark L. Jewell, president-elect of the American Society of Aesthetic Plastic Surgery. "We have gotten more data; the manufacturers have had more time to answer questions that the FDA has raised."
Jewell, a plastic surgeon from Eugene, Ore., says the key issues are safety, effectiveness and informed patient consent. "The FDA should evaluate the scientific merit of a drug or device and then turn it over to a clinician for ethical use." <<
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