Bausch & Lomb Reeling From Lens Solution Eye Fungus Link

Bausch & Lomb Inc. (BOL) made a big blunder when federal regulators revealed in April they were investigating links between its new-formula contact lens cleaner and a rare fungal infection known to cause blindness: It waited three days before withdrawing ReNu with MoistureLoc from the U.S. market.

"If there was something we could go back and change, that would be it," company spokeswoman Meg Graham said. "There isn't a handbook you can go to that tells you exactly what to do here."

Five weeks later, the eye-care product maker's campaign to shore up the reputation of its battered lens care business is under way — MoistureLoc was permanently recalled Monday from markets around the world. But management and financial analysts wonder if it acted too defensively for too long to deflect lasting damage.

"It's a terrible mistake for a company in crisis not to respond in a timely way," said Howard Rubenstein of Rubenstein Associates, a public relations agency in New York whose crisis-management clients have included Christie's International PLC and Cooper Tire & Rubber Co. (CTB).

"Americans and the world have short memories about stuff like this — provided it isn't mishandled," echoed Hayes Roth, chief marketing officer for Landor Associates, a brand consulting firm based in San Francisco. "If they don't protect the credibility of the Bausch & Lomb brand overall so that it is unassailable — as Tylenol became unassailable — they will never recover."

Johnson & Johnson's aggressive and very open response to a fatal 1982 tampering scare in Chicago — it promptly pulled 22 million bottles of Tylenol pain-reliever tablets from stores nationwide and introduced tamperproof packaging — is considered a classic case study in how best to handle a product-liability crisis.

Bausch & Lomb's ordeal, while less horrifying, sent ripples of anxiety and confusion through the nation's 30 million lens wearers that were magnified by its hesitation in removing MoistureLoc from store shelves.

While it voluntarily suspended U.S. shipments April 10 when the Centers of Disease Control and Prevention revealed an unusual incidence of the fungal infections in Americans using MoistureLoc, it didn't withdraw the product from sale until April 13 — by which time retailers led by Wal-Mart Stores Inc. (WMT) were already doing so.

After a month of exhaustive testing, the company issued a worldwide recall Monday, acknowledging for the first time that its $100 million-a-year solution appeared to be the "root cause" behind an unusual spike in Fusarium keratitis infections in U.S. and Asian markets supplied from its factory in Greenville, S.C.

At last count, the CDC said about two-thirds of 122 confirmed cases of the infection in the United States involved lens wearers who reported using MoistureLoc — and their medical outcomes are often unnerving.

Without prompt diagnosis and treatment — typically, eye drops must be administered for up to three months — the fungus can scar the cornea and cause blindness. Scores of victims have undergone corneal transplants to restore their vision, and a flurry of lawsuits could wind up costing the company anywhere from $500 million to $1 billion in damages, analyst David Maris of Banc of America Securities estimated.

The outbreak first surfaced in Asia, leading to a halt in sales in Singapore and Hong Kong on Feb. 18 that Bausch & Lomb did not disclose in the United States until after cornea specialists began noticing a jump in infections here in March.

The incremental steps in dealing with the outbreaks have rebounded badly. In the last two months, the company's stock has plunged 30 percent and its No. 1 spot in the domestic lens care market has come under assault from chief rivals led by Alcon Inc.

The maker of contact lenses, ophthalmic drugs and vision-correction surgical instruments had a 43 percent share of lens care sales among U.S. retailers in March versus Alcon's 41 percent, said Chris Cooley, an analyst with FTN Midwest Securities in Cleveland. But a survey of optometrists indicated its share had tumbled to 26 percent by mid-May while Alcon's shot up to 60 percent, Cooley said.

Lens care has generated more than $500 million, or 23 percent, of Bausch & Lomb's sales and an even bigger slice of profits. More worrisome, Cooley said, could be the long-term effect on its older, more widely used ReNu with MultiPlus solution.

"I don't think consumer concern will be relegated solely to the MoistureLoc brand, which obviously is now defunct," he said.

Other investors, however, think that assertions by Chief Executive Ronald Zarrella that the contamination problem is restricted to MoistureLoc's unique makeup could haul the 153-year-old company out of the doldrums.

Tests showed that polymers in MoistureLoc can create a film on lenses that shield the fungus from the solution's sterilizing agents.

"Bausch & Lomb's top priority is the safety of our customers," Zarrella said Monday in launching a television and newspaper advertising blitz aimed at stepping up marketing of the MultiPlus brand.

The stock has rebounded 10 percent this week, reflecting investors' hopes that the medical mystery has been solved and efforts can begin in earnest to put the problem to rest.

"It's the first step into the recovery stage, trying to salvage the brand and minimize the damage to their other product lines," said analyst Steve Hamill of Piper Jaffray.

While Roth sympathized with the difficulty of handling a public-safety emergency — "there's a state of semi-chaos when something like this happens and it's very hard to imagine being in the middle of it" — he underscored the need for Bausch & Lomb to be totally transparent with the public.

"It's the resisting, the defensiveness that in the end doesn't get you anywhere," he said. "They have everything to gain by not taking half-measures and by doing the responsible thing, whatever that is. ... The brand will live on, beyond products, beyond formulas."

Regaining consumer trust comes down to "taking steps that are counter to your own seeming economic interests," Rubenstein said.

"If it looks like they're more concerned with the consumer than they are with their bottom line, they'll come off much better," he said. "I would take this bad experience and say 'we recognized it, we dealt with it, we're protecting the public.' In other words, don't make believe it didn't happen."