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Integra LifeSciences slumps on recall announcement

NEW YORK (AP) -- Shares of Integra LifeSciences Holdings Corp. fell Thursday after the company announced a new manufacturing setback, saying it is taking some collagen products off the market.

THE SPARK: Integra said Wednesday that it is taking some production lots of its DuraGen and Dural Graft Matrix products off the market. The products were made at a facility in Anasco, Puerto Rico, between December 2010 and May 2011 and between November 2012 and March 2013. Integra said the items might not meet approved manufacturing standards, but added that it was not aware of any side effects in patients.

THE BIG PICTURE: Since the beginning of 2012 the company has received three warning letters from the Food and Drug Administration regarding its manufacturing facilities. The FDA sent the company a warning about the Anasco facility in February, saying the company was not meeting quality system requirements.

Integra also got warnings about facilities in Andover, U.K., and in Plainsboro in 2012.

The company expects to take a loss in the first quarter because of $2.5 million to $4.5 million in recall-related costs and because the recall will reduce its sales by $8 million to $11 million. It also said it may not be able to meet demand during the second quarter.

THE ANALYSIS: Janney Capital Markets analyst Spencer Nam downgraded Integra shares to "Neutral" from "Buy" on the news. Nam said he thinks the recall is a one-time problem, but it will have lingering effects on Integra shares because it will reduce the company's income and because of the ongoing FDA review process.

Citi Investment Research analyst Amit Bhalla maintained a "Buy" rating on Integra shares, but agreed the recall will weigh on the stock for some time.

"This is a disappointment which will likely take months to resolve, and it makes us more cautious on potential execution in addressing manufacturing issues," he wrote.

SHARE ACTION: Integra shares fell $3.27, or 8.5 percent, to $35.11 in afternoon trading. Earlier the stock traded as low as $33.55, its lowest price since June.