Beauty Can Be a Beast

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This is not what makers of wrinkle-reducing skin-plumpers were looking for.

First, their stocks slumped more than the S&P 500 on worries that customers will cut back on discretionary spending. And now the FDA is warning about potential side effects of their cosmetic drugs.

The FDA didn't name names, but Allergan (NYSE: AGN), Medicis Pharmaceutical (NYSE: MRX), Bioform Medical (Nasdaq: BFRM), and Anika Therapeutics (Nasdaq: ANIK) all sell dermal fillers. The FDA is worried about 930 reports of patients experiencing adverse events since 2003. While most of those events were pretty minor, there were some reports of serious issues, including severe allergic reactions.

As with all the recent FDA announcements about potential side effects, investors need to figure out how much this could really hurt sales of the products. We'll get a better idea of the severity at tomorrow's FDA advisory committee meeting, but my guess is that these reports won't hamper sales much. This is much more like TNF inhibitors -- Amgen (Nasdaq: AMGN) and Wyeth's Enbrel, Abbott Labs' (NYSE: ABT) Humira, and Johnson & Johnson's (NYSE: JNJ) Remicade -- having a higher incidence of fungal infections, than it is like Amylin Pharmaceuticals' Byetta potentially causing pancreatitis. The warnings are mostly highlighting something doctors already knew and aren't a shocker that will send share prices spiraling downward.

While the notification of the warnings isn't likely to hurt sales, I can't see a recovery anytime soon either. Much like their cosmetic-laser counterparts, makers of cosmetic pharmaceuticals are just going to have to wait out the downturn in the economy and hope we have a nice V-shaped recovery.