Implant business slows as patients await FDA decision.

Dr. Steven Teitelbaum is not exactly sitting on his hands these days at his busy Santa Monica plastic surgery practice. But he has noticed some of his prospective breast implant patients are holding off on surgery.

They're on the sidelines as they await the Food and Drug Administration to make its expected announcement approving silicone implants for wide cosmetic use.

"I do get patients who come in now, but say they'll only do it if they can get silicone," said Teitelbaum. "The patients in L.A. are among the most sophisticated and well-informed out there and know what they want, be it silicone or saline."

For the past 12 years, silicone implants have only been available under limited circumstances, such as for women getting reconstructive surgery, or those replacing existing silicone implants.

But in September, the FDA informed the two leading makers of silicone and saline implants, Mentor Corp. and Inamed Corp., both based in Santa Barbara, that their improved versions of silicone implants could be approved once conditions to reduce medical errors and enable long-term tracking of patients were worked out.

That news has repercussions both on Wall Street where takeover battles involving the companies are raging--and in doctors' offices, where the fast-growing breast implant market slowed in the third quarter.

The market has recently grown at an annualized rate of 15 percent a year but that fell by more than half, to 7 percent, in the third quarter, a fall that analysts attribute to patients taking a wait-and-see approach to an elective surgery.

"It's clear patients are waiting," said CIBC World Markets analyst John Calcagnini, who covers both Mentor and Inamed. "At the same time, the companies who want in on the market aren't waiting. Everyone realizes that the silicone market is going to take off, even with the implants being more than twice the price of saline."

Cost factors

Beverly Hills plastic surgeon Dr. Francis Palmer HI, estimates that 10 to 15 percent of his patients are sitting on the fence, but he expects that once restrictions are lifted, the 20 percent of silicone implants he performs will jump to at least 50 percent.

"If they drop the price, then it will go to 80 percent," Palmer said, noting that patients in the L.A. area generally pay $6,000 to $8,000 for a basic saline implant procedure at a reputable facility, with at least a $2,000 premium for silicone.

"It's (only) the cost that's going to keep silicone from dominating the market right away."

Wider U.S. use of silicone implants will add at least $250 million to the $550 million worldwide market for silicone and saline implants, Calcagnini said.

Silicone implants now comprise less than a third of the U.S. market, but it dominates overseas, often accounting for 80 percent of sales in some European countries.

That's added fuel to an increasingly heated bidding war among medical device companies not currently in the breast implant market.

On Nov. 15, Irvine-based Allergan Inc., best known for its Botox treatment, made a $3.2 billion bid for Inamed, which followed a $2.8 billion bid for the company by Scottsdale, Ariz.-based Medicis Pharmaceutical Corp. Mentor has made an unsolicited $2.2 billion bid for Medicis on Nov. 21, which its board so far has rejected.

"Allergan wants to pay eight times sales for Inamed, when small companies are usually trading at a lot less. So they're paying a substantial premium based on where they think the aesthetics market is going," said RBC Capital Markets analyst Ken Trbovich.

Lobbied hard

Both Trbovich and patient advocate Diana Zuckerman warn that the FDA could take several months to work out details for patient registries, additional surgeon training, and possibly additional study data that it will require of Mentor and Inamed.

Zuckerman notes that the FDA's "approvable letters" to Mentor and Inamed came months after the agency's advisory panel voiced concerns about the lack of positive data provided by the companies about how the implants performed after several years inside a woman, especially among mastectomy patients who are more susceptible to complications. Silicone implants are generally expected to last at least 10 to 15 years before replacement.

"The companies spent a lot of money and lobbied very hard this year to get this pushed though," said Zuckerman, president of the National Research Center for Women and Families. "It may be good for them in the short run, but in the long run, if there are any problems, they could end up looking like Merck."