Sientra off by more than 50% after it discloses CE mark suspension for its contract manufacturer

Breast implants--Courtesy of Sientra

Breast implant company Sientra ($SIEN) saw its valuation cut in half on news that its contract manufacturer Silimed has had its CE mark suspended by the U.K. Department of Health. The move came after German regulators conducted an inspection of a Brazilian manufacturing plant--and regulators found that "the surfaces of some implants were contaminated with particles."

Despite the revocation of CE mark, both the British agency and Sientra stated that they do not have safety concerns about the company's product. But investors were not reassured--knocking about 54% off Sientra's share price on Sept. 24 to push it below $10.

That figure put the investors that just participated in Sientra's follow-on to raise $66 million--with a price of $22 per share that just closed on Sept. 23--deeply underwater. At least a couple of analysts, from Piper Jaffray and Leerink, issued reassuring notes and the price recovered by about 10% in early trading on Sept. 25 to about $11.

Richard Newitter of Leerink argued in a Sept. 24 note that Sientra's products are manufactured in the same plant--but that they have separate protocols than the products in question. He sees it as "premature to extrapolate that the FDA will take similar action" to what occurred in the U.K. Newitter remains optimistic that Sientra's manufacturing should be unaffected--pointing out that the FDA has inspected the same facility several times in the last 10 years.

However, abruptly on Sept. 25, Leerink suspended its rating on Sientra, which had been "Outperform," due to "recent uncertainty regarding the sole manufacturer of the company's sole product."

Investor lawsuits are already in the offing, as follow-on participants speculate about the odd timing of the CE mark suspension announcement--coming only a day after the follow-on closed.

Venture investors remained the primary holders of Sientra at June 30, so they may have gotten burned with this news as well. The top holders at that time included OrbiMed Advisors (21.3%), Clarus Ventures (18.3%) and Abingworth (14.7%).

The share price is now well below the $15 from Sientra's market debut almost one year ago.

- here is the letter to physicians from Sientra
- and here is the statement from U.K. regulators and the one from German regulators

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