(Adds company quotes, details, background) By Ransdell Pierson NEW YORK, Nov 21 (Reuters) - Advanced Medical Optics Inc. <EYE.N> on Tuesday recalled almost 3 million units of its Complete MoisturePlus contact lens solution due to sterility problems that could lead to eye infections, the second major recall of a contact lens solution this year. The company, whose shares fell 9 percent on the news and a related decision to slash its 2006 profit forecast, said three lots made in China and sold in Japan were found to have bacterial contamination. Most of the recalled 2.9 million units were shipped to Japan and other parts of Asia, while the company said it was recalling 183,000 units in the United States. "We had a handful of adverse-event complaints in China and one in Japan, which involved minor eye redness, irritation and blurred vision," Chris Muller, a senior marketing executive at Advanced Medical, told Reuters. He said there have been no such complaints in the United States related to the recalled lots. The solution had been contaminated by ralstonia bacteria, water-borne organisms that are not commonly associated with eye infections but do pose possible eye risk, Muller said. "Non-sterility of a contact lens solution may have serious health consequences, including eye infection and microbial keratitis," the company said, though it considered the likelihood of harm to be "low." The company has halted all manufacturing at the China factory to clean it, which it expects to take 10 to 12 weeks. The announcement comes just six months after the global recall by rival Bausch & Lomb Inc. <BOL.N> of its ReNu with MoistureLoc contact lens solution after it was linked to keratitis, or inflammation of the cornea, caused by a fungus. ReNu with MoistureLoc had annual sales of $100 million. Analysts have estimated Bausch & Lomb faces up to $1 billion in potential liability from the infections. Bausch & Lomb, beset with accounting irregularities, said this month it expects to report lower third-quarter earnings largely due to the recall. Advanced Medical posted eye-care sales of $209 million in the first nine months of 2006, and the business accounts for about 28 percent of total company sales. The recalled contact lens solution is the company's biggest eye-care product. In view of its own recall, Advanced Medical now expects 2006 earnings per share, excluding special items, of $1.30 to $1.40, compared with a prior forecast of $1.85 to $1.90. Analysts had predicted an EPS of $1.88, according to Reuters Estimates. The Santa Ana, California-based company sees 2007 EPS of $1.85 to $2.00, down from the $2.25 to $2.35 forecast earlier. Analysts were expecting $2.28, according to Reuters Estimates. For the rest of 2006 and 2007, Advanced Medical projected recall-related costs and charges of $35 million to $40 million. It now expects 2006 revenue of $985 million to $1 billion, below a previous forecast of up to $1.02 billion. For 2007, the company projects revenue of $1.06 billion to $1.08 billion, compared with its previous forecast of up to $1.1 billion. Advanced Medical shares fell as much as $4.85 to a 13-month low of $34.40 on the New York Stock Exchange, while shares of rival Alcon Inc. <ACL.N> rose 5.9 percent to $107.70. Bank of America analyst David Maris said sales of Alcon's contact lens solutions should benefit from the recalls. "From the Bausch & Lomb example, we have seen that it is difficult to recover from market share losses," he said in a research note. (Additional reporting by Kim Dixon in Chicago, and Saumyadeb Chakrabarty and Himani Sarkar in Bangalore)
