A poke in the eye…

April 25, 2007

images8.jpegEarlier this week, Baush & Lomb’s (BOL) stock surged 11% in one day on rumors that it was a potential takeover target. But it’s the 10K filed earlier today that seems more interesting to me. (The 2006 K was late because it wasn’t until Feb. 2 that the company filed its K for 2005.)

That’s because a quick skim of the legal proceedings shows that the Re-Nu MoistureLoc problem seems to have generated a lot more lawsuits than previously disclosed. The company recalled the product — one of its top sellers — last year after people started coming down with a strange eye fungus. The lawsuits quickly followed, and judging by the current K, show few signs of letting up, despite the fact that it’s been a year since the recall was issued. In today’s filing, the company disclosed 344 product liability lawsuits stemming from MoistureLoc. About half of those lawsuits have been filed in federal court with the other half in various state courts.

Now compare those numbers to the ones in the delayed 10K that the company filed on Feb. 2: 196 lawsuits. How did the number go from 196 to 344 in a little over two months? Were they really new lawsuits, or just newly tracked? Also interesting is the additional disclosure that the company provides in today’s K on the lawsuits: “These cases and claims involve complex legal and factual questions relating to causation, scientific evidence, actual damages and other matters. Litigation of this type is also inherently unpredictable, particularly given that these matters are at an early stage, there are many claimants and many of the claimants seek unspecified damages.” The new disclosure ends with the “material adverse effect” warning as well.

As for the merger speculation, it could be real. But any talk of a merger is going to have to include the price-tag for this growing number of lawsuits.

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