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Weak economy cutting into vanity business

CHICAGO (Reuters) - A weakening U.S. economy is taking a small swipe at American vanity, with Lasik vision correction procedures down and other cosmetic treatments and surgeries slipping.

A Cuban doctor performs free eye surgery to an unidentified patient at the Ramon Pando Ferrer hospital in Havana September 12, 2006. REUTERS/Enrique De La Osa

Although analysts say a recession would have to be severe before Americans would forgo cosmetic procedures, especially the less expensive ones, there are still some signs of distress.

“We’ve already see some. It depends how deep and how long the recession is,” Jefferies & Co analyst Peter Bye said.

The economic downturn already has affected cosmetic procedures, especially the higher priced surgeries. Lasik, for example, might cost $3,000 to $4,000, and breast implants can cost $10,000. Injectables, including dermal fillers and Botulinum Toxin, are less affected since they typically cost less than $1,000, he said.

Advanced Medical Optics Inc EYE.N, a maker of eye-care products and lasers used to correct vision, acknowledged this week that the economy is starting to negatively impact these elective procedures.

Advanced Medical Chairman and Chief Executive Jim Mazzo told a conference call that during the first six weeks of 2008, “we have seen the deteriorating U.S. economy negatively impact our domestic LASIK procedure volumes.”

Mazzo lowered his 2008 financial forecast, citing among other things, expectations for a significant drop in vision correction procedures.

Joanne Wuensch, an analyst with BMO Capital Markets, said it was the first time Advanced Medical’s management has acknowledged that the economy was affecting its business.

“There’s a strong correlation between consumer confidence and U.S. Lasik procedures. People don’t spend money on Lasik if they feel like things are really bad,” she said.

But that appears to apply less to other cosmetic procedures, such as injectable dermal fillers and other anti-wrinkle treatments. Analysts said the outlook for these cheaper procedures, as well as breast implants, is not that bad.

“It’s one of the last things to get hit when the economy turns,” said Aviva Shedletzky, a senior analyst with Millennium Research Group, a market research firm focused on the medical device, pharmaceutical and biotechnology industries.

“We’re not really expecting the economic slowdown to have a huge affect on cosmetic procedures,” said Shedletzky, “Our society is so focused on youth and people really want to look good...so as long as there’s at least some discretionary income, people will keep getting them.”

And when discretionary income evaporates, many patients turn to financing, she said, noting that there are still creditors offering loans to patients who are over 18-years-old and who have a minimum income of $15,000.

Millennium forecasts a 5.5 percent annual increase in breast implants sales, fueled by U.S. regulatory approval of silicone breast implants last year, which has bolstered demand as women change out saline implants for the more natural looking and feeling silicone.

Millennium said it expected sales of dermal fillers, which are injected into a wrinkle to smooth it out, to grow by 10 to 15 percent over the next five years, down from 18 percent over the previous 5 years.

"I'm concerned, but not alarmed. The country seems to be in a recession and that affects all categories of spending, but we haven't seen evidence yet that it's affecting this (aesthetic) category," said Jonah Shacknai, chairman and chief executive of Medicis MRX.N, the maker of the dermal filler Restylane.

David Pyott, chief executive and chairman of Allergan Inc. AGN.N, the largest maker aesthetic products, said he had not seem an impact from the downturn in the economy when he was questioned after the company reported its quarterly results on January 30.

“Regarding recessionary environment, as I have said consistently since October, we monitor very carefully what’s going on, in particularly the U.S.,” Pyott told analysts on a conference call.

“Everything is direct shipment, so there is no wholesale movements to kind of mask what is true demand in the middle.....There’s not only strong growth in the U.S. There’s strong growth across the world,” he added.

The harbinger of growth potential is not only the number of patients seeking treatment, but also the number of doctors entering the field and both point to future growth, he said.

During a recent conference call, Mentor Corp MNT.N Chief Financial Officer Michael O'Neill told investors that the company has felt a pinch from the economy.

“We’re suffering in the U.S. market from a combination of downward pressure in the economy and...some share loss as well,” he said.

Reporting by Debra Sherman, editing by Leslie Gevirtz

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