FDA’s pelvic mesh ban spooks investors

The FDA’s ban on U.S. sales of pelvic mesh products for pelvic organ prolapse may have spooked investors, but should only have a minimal effect on the books at Boston Scientific (NYSE:BSX) and Coloplast (CPH:COLO-B) – the only companies still selling mesh for prolapse in the U.S. – according to analysts and the company.

Yesterday the FDA ordered an immediate halt to sales and distribution of Boston’s Uphold Lite and Xenform products and Coloplast’s Restorelle DirectFix. Today Boston said the ban is expected to deliver a $25 million top-line hit, which amounts to about 0.003% of its annual revenues.

“Boston Scientific continues to assess any potential additional impact to the business,” the company said, noting that it will update investors during its first-quarter results report next week.

For Coloplast, prolapse mesh sales represent roughly 0.2% of its total revenues, “therefore the financial impact is immaterial and does not impact our financial guidance,” the company said today. Coloplast reported revenues of roughly $2.49 billion for its last fiscal year.

“Our mission at Coloplast is making life easier for people with intimate healthcare needs. Pelvic organ prolapses can be a painful, embarrassing and a debilitating issue for the women who suffer from it. While mesh sales to treat POP in women account for approximately 0.2% of our global revenue, we firmly believe that patients and their physicians should have a choice of therapies. We are disappointed with the FDA’s decision because it reduces the treatment options for women with POP. We remain committed to providing alternative therapies,” CEO Kristian Villumsen said in prepared remarks.

Still, investors pushed both stocks down yesterday and today, with BSX shares closing off -4.3% at $36.17 apiece yesterday; the stock was down -1.2% to $35.73 per share today in mid-morning activity in New York. In Copenhagen, COLO-B shares were down -2.7% to kr678.40 today.

Analysts said the selloffs are over-done.

“Overall we view any negative impact to sales as minimal,” SVB Leerink analyst Danielle Antalffy wrote yesterday in a note to investors. “But, understandably so, investor concern seems to be focused around litigation risk and could justify the selloff we’re seeing today. However, we followed up with management and view any litigation risk around FDA’s order as minimal.”

Boston had already settled 95% of the transvaginal mesh product liability lawsuits it faced as of the end of last year, Antalffy noted.

“While this is a credit negative for Boston Scientific – one of the two remaining manufacturers of this product – Moody’s does not expect the impact to be material,” added Moody’s senior vice president Scott Tuhy in a statement emailed to MassDevice.com. “Boston Scientific has stated its global surgical mesh business is about 1% of total sales. Of that 1% of revenue, not all will be impacted by the FDA announcement because some of Boston Scientific’s mesh business is outside of the US or is sold for different indications.”

($1 = kr6.60841)

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