Initial Disclosure: After extensive research, we have taken a short position in shares of Establishment Labs Holdings Inc. (NASDAQ:ESTA). This report represents our opinion, and we encourage every reader to do their own due diligence. Please see our full disclaimer at the bottom of the report
Establishment Labs was founded in 2004 by Juan José Chacón-Quirós, who still serves as CEO and Director. The company primarily manufactures and sells silicone breast implants under the brand name Motiva.
Establishment first began selling its Motiva implants in October 2010. They remain its best-selling product line. [Pg. 1] Its implants are manufactured in two Costa Rican facilities it owns. [Pg. 6] To date, they’ve been approved and commercialized in Latin America, Europe and parts of Asia.
With its success primarily in Latin America, the company went public on the Nasdaq in July 2018 at $18 per share.
Establishment’s largest market is Brazil, accounting for 11.6% of consolidated revenue in 2021. [Pg. F-9] The company recently announced its intended launch of its products in China “as early as the second half of 2022”, with hopes to eventually gain U.S. approval in 2023. [Pg. 6]
Echoing the narrative of innovative companies like Apple, Amazon, HP and others, Establishment CEO Juan José Chacón-Quirós has touted that he developed his implant prototypes with a modified pizza oven in his garage.
The garage is such a cornerstone to the company’s culture that Chacon and fellow founders say they make a pilgrimage back to it every August.
Establishment attributes Motiva’s success to its “unique surface technology” which “demonstrates positive clinical outcomes”. [Slide 5] The company’s website claims Motiva has an “unparalleled safety record”.
In company filings, Establishment touts an 11-year post-market surveillance safety study that shows, using a robust 1.9 million implant sample size, only 0.1% of all Motiva implants resulted in safety complaints, with <0.1% rates of common complications like rupture and capsular contracture. [Pg. 14]
Similarly, Establishment reports in SEC filings that FDA approved competitors have an almost 12x higher rate of adverse events.
Establishment’s CEO has said “the rigorous science and clinical data behind Motiva sets us apart from the competition.”
The company has attributed this safety record to its innovation, describing its 6th generation Motiva Implants as “incorporating revolutionary technologies”.
The bull case for Establishment Labs focuses mainly on the potential for the company’s products to break through in the U.S. market. [Slide 13]
The U.S. breast implant market is the largest in the world, accounting for an estimated 22.9% of industrywide sales in 2020. It is the only country responsible for more augmentations than Brazil, where Establishment already has a foothold. [Pg. 5]
Bulls are confident that the company’s innovations and safety data will translate to U.S. FDA approval and significant U.S. market share. Establishment initiated its FDA pre-market approval (PMA) process in late 2021 after receiving an investigational device exemption approval in March 2018. [Pg. 12]
The process looks to be moving along favorably. In April 2022, Establishment announced that a “high rate of patient follow-up and preliminary clinical results [were] encouraging”, according to the principal investigator of its key U.S. clinical trial, Caroline Glicksman.
The company is pursuing a modular submission – a pre-market approval method that is broken down into sections or “modules” (such as preclinical, clinical, manufacturing, that together become a complete application) – and has submitted three of four planned modules, with the fourth expected soon. The company plans to file its PMA submission with the FDA in Q4 of this year for aesthetic indications. Establishment estimates that the FDA PMA process takes three to twelve months. [Pg. 19]
Given its claimed results, Establishment says in SEC filings that its product is positioned for premium pricing in the marketplace. [Pg. 83] [Pg. 14]
At a market cap of ~$1.4 billion, Establishment trades at around 9.5x sales, pricing in substantial revenue growth and profitability in the years to come.
But despite claiming to have a winning product on the market for more than 10 years, Establishment has incurred net operating losses since its inception as a public company. The company warns of continuing “significant” research and development and general expenses going forward. [Pg. 53]
Its net loss widened from $5.3 million in Q2 2021 to $37.1 million in Q2 2022. As of June 2022, Establishment had an accumulated deficit of $249.4 million. [Pg. 4]
CEO Chacon said during Establishment’s Q1 2022 conference call that he expects its current funding will get the company to cash flow breakeven and pay for innovative projects. But as of its most recent quarter, the company has $91.3 million in cash and $145.5 million in notes payable, indicating that it will need significant capital to fuel its plans. [Pgs. 4-5] [Pg. F-3]
Its debt comes from a $225 million credit facility from private lending giant Oaktree, announced in April 2022. The lender is charging 9% per annum that can step down to 8.25% if certain conditions are met. The first $150 million tranche was disbursed in April 2022 and used to refinance the company’s existing debt. [Pg. 24]
Establishment’s valuation is pricing in U.S. market domination, a market that is currently controlled by much larger competitors Johnson & Johnson and Allergan, who represent around 80-90% of the market. Both Allergan and Mentor (another implant manufacturer in the US) additionally have portfolios of aesthetic products like Botox and Liposuction systems, creating cross-selling opportunities and a competitive barrier to entry for one-product companies like Establishment.
Establishment’s most comparable publicly traded competitor, Sientra, received FDA approval in 2012 after presenting data supporting its first implant product. Like Establishment, Sientra focused almost exclusively on implants, and despite similar claims of unrivaled safety, Sientra has won only around 13% of U.S. market share. It trades at ~0.51x sales with a market cap of about $45 million as of the time of this writing, underscoring the challenging competitive environment Establishment intends to jump into.
Furthermore, quick regulatory approval may not be as easy or as fast as Establishment hopes for. Over the last few years, the FDA has been tightening rules on implants, as questions circulate about women getting mysteriously sick after implantation, often referred to as implant illness.
As it stands today, the company is laden with debt and burning ~$14.2 million in free cash flow per quarter yet it trades at 9.5x sales almost entirely due to hopes that it will dominate the competitive U.S. market through its superior safety record.
As we will show, despite the company’s claims of superior safety, we found that almost all key safety studies touted by the company have undisclosed or under-disclosed conflicts of interest.
Establishment’s claimed pioneered innovations, like embedding scannable RFID microchips inside its implants, amount to little more than marketing gimmicks and pose potential new safety risks. [Pg. 29]
None of this should come as a surprise, however, given CEO JJ Chacon’s background. Prior to Establishment, he was a distributor of Poly Implant Prothèse (PIP), the most notorious, faulty breast implant brand in history, despite known safety risks relating to that manufacturer at the time.
Beyond undisclosed safety questions, we’ve also identified financial risks. Import/export records show that Establishment ships product to entities formerly owned by the CEO and his family, raising questions of potential conflicts of interest.
On September 12, 2022, Establishment tried to bolster credibility for its U.S. launch by announcing it had hired former founder and CEO of Sientra, Hani Zeini, to an “exclusive, multi-year advisory contract”.
Establishment’s CEO said of Zeini in the press release:
“His experience will be invaluable as we seek to lead the US market…”
Zeini’s “invaluable” industry experience includes being sued for fraud by the Securities and Exchange Commission in 2018 for lying and destroying records, and being barred as an officer or director for 5 years.
A 2018 SEC complaint alleged Zeini “fraudulently conceal[ed] damaging information about his company, Sientra” while the company raised more than $61 million in a public stock offering. [Pg. 2]
Specifically, the SEC alleged that Zeini concealed that its regulatory certificate needed to sell implants in the EU was suspended due to particles identified during an audit of manufacturing facilities.
Instead of disclosing the information, Zeini allegedly concealed it until after the company closed a $61 million stock offering. He then reported it the next day and the stock cratered 52.6%.
“Zeini acted knowingly, recklessly and without reasonable care,” the SEC wrote.
As part of a settlement with the SEC, Zeini has been barred from being an officer or director of a public company. Instead, he is now serving as Establishment’s key advisor to the U.S. market.
On September 8, 2022, the FDA issued a safety alert, highlighting new cases of cancers and lymphomas being found in scar tissue around breast implants.
The FDA warned that the agency was only just beginning to lift the lid on the problem:
“The safety signal issued today is an emerging issue that will require steadfast, ongoing evaluation and communication with patients, healthcare providers and manufacturers.”
The FDA says the types of cancer now being reported, including squamous cell carcinoma (SCC) and “various lymphomas”, are separate from BIA-ALCL lymphoma, yet another cancer concern that led to a worldwide withdrawal of Allergan textured implants in 2019.
Unlike previous scandals that have come to light in the breast implant industry (see Appendix A), the new alert covers all breast implants – not just a specific type or texture. The notice also highlights that key safety information is not yet known.
Long-time patient advocate Jan Spivey, founder of the UK´s PIP Action Campaign told us she believed the latest FDA warning is a potentially mortal blow for the breast implant industry, already undermined by numerous health scares:
“The sinking ship is silicone and we´re watching the rats leaving the sinking ship and the only people who are going to be ending up on that ship will be vulnerable women. Those rats are big, fat and ugly and making huge amounts of money. I think the industry knows that we´re on the last legs of silicone breast implant surgeries being acceptable to anybody and passing necessary standards and I think they´re all going to be on the way out now.”
Establishment cultivates an image of an organization focused on safety in an effort to differentiate its devices from the scandals and health scares that have besieged the breast implant industry since its inception in the 1960s [See Appendix A for more on these]:
“Establishment Labs was founded to improve safety and aesthetic outcomes in breast surgery. With this as our mission, we have been diligently researching breast implant surfaces and the immune system response for more than a decade.”
Our review of CEO JJ Chacon’s history shows that he played a region-wide role in one of the implant industry’s most-damaging scandals, distributing faulty breast implant brands Poly Implant Prothèse (PIP).
The corporate biography for Establishment Labs CEO and founder Juan Jose Chacon vaguely lists his past experience as a General Manager at an unnamed aesthetic medical device distribution business:
“…serving for almost a decade as General Manager of an aesthetic medical device distribution business in Latin America.”
That distribution company, per Costa Rican corporate filings, was called MedSurgical, a distributor for PIP in the Latin America region.
PIP was a French company founded in 1991 that was liquidated in 2010 after it was revealed that it was illegally manufacturing and selling implants made from cheap industrial silicone rather than medically mandated silicone.
Hundreds of thousands of adulterated implants were sold globally by PIP. The scandal resulted in PIP folding, its founder being sentenced to four years in jail and victims suffering from auto-immune disease and cancer scares. Tens of thousands of women have sought or have received compensation as a result of the scandal.
Beginning in March 2010, the worldwide PIP scandal began to publicly unfold. Up to 400,000 women worldwide learned that their PIP silicone implants were not manufactured with clinical-grade silicone gel but a far cheaper industrial product, creating a high risk of rupture and leaking, among other problems.
The FDA had issued a seizure order and banned PIP from importing its saline-filled implants into the U.S. as early as 2000 – pending pre-market approval. In a warning letter issued to the CEO of PIP, the FDA described the devices as “adulterated”, “misbranded” and listed almost 500 critical observations after a site visit to the PIP factory.
“Given the serious nature of these violations … all devices manufactured by PIP … may be detained without physical examination upon entry to the United States until these violations are corrected,” the letter said.
In 2000, the FDA banned PIP from importing its saline implants to the U.S. 
Following these glaring red flags about PIP’s product safety, MedSurgical combined to sell thousands of PIP silicone implants between 2003 to 2009, according to multiple press reports from across Latin America. [Nicaragua, Costa Rica, Guatemala, Chile, Peru]
MedSurgical was incorporated initially in Costa Rica in 2002 and run by the Chacon family. Documents on file at Costa Rica’s corporate registry show that now-Establishment CEO Juan Jose Chacon was general manager and that four siblings, his then wife and his first cousin, were among the early directors and shareholders. 
Most of the MedSurgical sales and distribution network shut down between 2011 and 2018 as the PIP scandal and consumer litigation gathered pace, according to corporate filings and comments from former business associates. [1,2,3] One of Chacon’s former business associates in Central America confirmed to us the company had distributed the notorious implants:
“Medsurgical was a Costa Rican company belonging to Juan Jose Chacon with subsidiaries in Latin America. They imported these (PIP) implants and stopped doing so when the problems in Europe arose and then they began to sell Motiva implants.” (Translated from Spanish)
Another of Chacon’s business partners, Jose William Peña Caicedo, a former director of MedSurgical Colombia, which ceased operations in 2013 as the PIP scandal gathered pace, told us:
“I did not deal with PIP. They were handled by other countries in the MedSurgical portfolio but not in Colombia. It (MedSurgical) has disappeared from the market now.” (Translated from Spanish)
A 2012 thesis by students at the Legal Sciences Faculty at the University of Managua questioned why MedSurgical was not prosecuted for its role in distributing defective implants in Nicaragua and elsewhere in Central America. Its authors argued:
“We believe that the company (MedSurgical) failed in its responsibility to inform the Nicaragua health authorities about the defects and anomalies that were exhibited by the PIP implants they were importing. They kept silent probably to protect their own pockets…We believe the company should be closed in Nicaragua and its representatives should be prosecuted.” [Pg. 69] (Translated from Spanish)
As the Medsurgical distribution network was mostly dissolved, and the PIP scandal gathered pace, Establishment Labs pivoted to launching its own range of breast implants. [Pg. 2]
MedSurgical affiliates continue to operate in at least Mexico and Ecuador where they now import or distribute Motiva implants for Establishment Labs. 
Chacon seemed to see the PIP scandal – and the fact that thousands of women worldwide were clamoring to remove their dangerous, leaking and rupture-prone implants – as a marketing opportunity.
Beginning around 2011, industry newcomer Establishment promptly launched a program offering discounted Motiva implants to PIP victims.
Establishment has called its products “revolutionary” and claims it wants to address “industry-wide complacency” regarding safety. [1,2] The company promotes two main innovations as first of-its-kind safety features in its most recent annual report: [Pg. 3]
Key ‘Innovation’ #1: Establishment Claims Placing RFID Microchips In Its Implants Provides Both A “Digital Passport” For Your Breasts And A New Business Opportunity For The Company
One claimed Establishment safety innovation is a scannable RFID chip embedded inside its implants that can be used by doctors to obtain serial numbers and other basic information about the implant. [Pg. 3] [Pg. 12]
RFID is touted as part of the company’s intellectual property portfolio and to “give patients comfort that any future recalls can be positively identified as applying, or not applying, to that patient’s particular implant”. [Pg. 16]
A video promoting the chip on Establishment’s website is tagged with the terms “innovations”, “science” and “safety”.
In August 2013, Establishment first began marketing RFID chips in its implants, according to a press release. At the time, the technology was owned by another company.
Prior to humans, the chip technology was targeted toward domestic pets like cats and dogs. The company then set its sights on humans and implanted 2,000 of the chips in people worldwide.
The chips were eventually approved by the FDA in 2004 after it determined they were not regulated medical devices as long as they were marketed for security, financial and identification purposes, and not for providing information to assist in the diagnosis or treatment of injury or illness.
(The head of the Department of Health and Human Services, which oversaw the approval, became a board member of the company that owned the technology within months of the decision.)
The company failed after facing varied issues including (1) an auditor resignation over accounting disagreements; (2) reports of FDA investigations into the chips that led to the suspension of their marketing; and even (3) allegations that the company that owned the technology at the time, VeriChip, was touting “fake” FDA approvals. TechDirt.com reported:
“Back in 2002, prior to getting FDA approval, there was the too good to be true story of an entire family that just couldn’t wait to get themselves chipped. The whole thing sounded sketchy from the beginning, and many suspected that the entire thing was merely created by VeriChip to get publicity.
Soon afterwards, VeriChip announced that the FDA had said that implantable RFID chips were not regulated medical devices, and therefore could be used for chipping humans. Note that the announcement came from VeriChip. That’s because the FDA did not say what VeriChip claimed it said. VeriChip had asked the FDA to declare the chips unregulated devices, and the FDA simply requested more information. VeriChip, in turn, took that request for more info and claimed that the devices were unregulated, leading to a rather unhappy FDA.”
Just three years after FDA approval, in 2007, media revealed that studies dating back to the 1990’s had shown that chip implants had “induced” malignant tumors in some lab mice and rats.
The Associated Press cited several studies showing high rates of cancer in microchipped mice.
Dr. Robert Benezra, head of the Cancer Biology Genetics Program at the Memorial Sloan-Kettering Cancer Center in New York, said in 2007:
“There’s no way in the world, having read this information, that I would have one of those chips implanted in my skin, or in one of my family members.”
The 2007 report sent shares of the company crashing.
In SEC filings, the company said it stopped actively marketing the microchip system by early 2008, shortly after the cancer news broke. [Pg. 21]
Another piece, published in 2010 by a consumer group fighting retail surveillance called CASPIAN, showed results from 8 studies that found microchip induced cancer.
Establishment’s RFID chips are not implanted directly into the skin but are rather located inside of the implants. There have been some additional, more recent studies, claiming that RFID chips are safe for implant. However, as one recent study from 2018 points out, “the technology is new”, “we have yet to evaluate all the risks it entails” and “it would be beneficial to carry out a careful impact assessment” for ethical, privacy, health and economic aspects.
Given data from the legacy studies, combined with the FDA’s new findings about potentially new cancers in both saline and silicone breast implants, it seems premature to tout RFID chips as a safe technology without robust clinical testing.
Following the RFID cancer study revelations, Establishment purchased the RFID assets out of default in in 2015.
Establishment’s CEO JJ Chacon signed off on the agreement next to the guarantor, Magna Equities, represented by Joshua Sason.
Joshua Sason and Magna were later sued by the SEC in 2019 for “illegal and fraudulent” microcap transactions.
The regulatory agency alleged the illegal transactions resulted in proceeds of more than $25 million.
In short, following the failure of the company over cancer concerns relating to its RFID technology, Establishment purchased the RFID assets from an alleged penny stock fraudster and is now promoting it to customers as a safety innovation.
Veteran industry executives we checked with described the RFID chips as a marketing ploy and a potential health hazard. One executive for a leading U.S. manufacturer told us:
“We looked at it (RFID chips). No real competitive advantage. More marketing jargon to give the look of a new safe implant.”
“We´ve actually done market studies with physicians and it´s not something that is high on their list as something that is very important in their decision making.”
Another senior sales and marketing executive at a leading European manufacturer wrote us:
“It´s not for us. IMO (in my opinion), a marketing gimmick. Potentially more negative patient benefits than positive.”
MRIs provide several types of crucial imaging for women who have breast implants, such as screening for breast cancer and evaluating implant integrity.
A 2019 data sheet from Establishment says that its “Qid” RFID transmitters create magnetic artifacts obscuring part of the images taken by MRI. However, the company says that MRIs can still be performed safely in patients with metallic objects that are “’weakly” ferromagnetic and minimally attracted by the magnetic field. [Slide 2]
“When patients undergo MRI, a small area posterior to the implant is obscured (see images 1 and 2). The mammary tissue, however, is fully visualized because the dimensions of the artifact do not extend beyond the anterior implant limit.”
Further, in a pamphlet aimed at doctors, Establishment claims the chips are safe under 1.5 and 3 Tesla MRIs.
Professionals we spoke with disagreed with the company’s claims about both the RFID chip’s usefulness and the interference it caused with MRI imaging. Former Establishment brand ambassador Dr. Georg Huemer, who Establishment has referred to as a “renowned Professor”, told us:
“[The QID tracker] was a big deal in the beginning and they said OK it will change the implant industry. But I don´t know if it´s still available because what I know a few years ago they also used implants without the transponder because many of the users and also the patients they were quite startled with those transponders in terms of ‘Oh can I be tracked down or anything’. And also with MRI imaging it was a big deal that the transponder causes some artifacts in imaging of the breasts.
By the time I used it was only for tracking the implant itself so it just gave the exact number of the implant. It didn´t give any biological data like body temperature or pressure.”
Other surgeons we spoke to also raised doubts about the benefits of the transponder when it came to MRI imaging. A surgical oncologist dedicated to breast cancer treatment, Dr. Nicola Rocco told us:
“The QID RFID transponder is not primary for implant safety. Some published evidence showed possible interference of the transponder with imaging (MRI).”
Establishment consultants have also published studies saying it was not safe to rely solely on an MRI when RFID chips were inserted. Radiologists Michael Nelson and Sina Meisamy, who both disclosed their role as paid consultants for Establishment subsidiary JAMM Technologies, wrote in this 2019 study:
“The RFID causes a susceptibility artifact that is cuboidal in shape and along the posterior wall of the breast implant near the region of the chest wall. This may reduce the accuracy of identifying recurrent cancer in this region on MRI.”
Dr. Michael Nelson, a Professor of Radiology at University of Minnesota, issued a stronger warning about the QID chips, with a specific focus on Establishment Labs. Per his 2017 research published in the Journal of Surgery:
“Concern for patient safety is real due to the RFID-M artifact, and the possibility of a missed cancer diagnosis.”
In 2004, the FDA gave the company that originally owned Establishment’s RFID technology a Class II approval for the chips to be inserted into patients’ arms.
But in its letter to the company, the FDA raised a slew of potential health risks, including magnetic resonance imaging incompatibility and electrical hazards.
Issues with Establishment’s RFID chips are already appearing in court.
Zuleide de Santana Silva, a 53-year-old schoolteacher, filed a civil lawsuit in late 2020 for material and moral damages against Establishment Labs and against a plastic surgeon in Brazil. She also requested the urgent removal of her implants.
Her case alleges the RFID microchips in her Motiva implants made it impossible for her to get an accurate MRI to detect early signs of breast cancer after she had been flagged by oncologists of being at risk for potential cancer. The case is ongoing.
Hindenburg submitted a series of public access to information requests to Brazilian courts to get fuller disclosure of several patient lawsuits against Establishment.
De Santana Silva´s lawyer, Paolo Martins, wrote in support of our requests:
“Women need to be alerted and so this case should be processed without any judicial secrecy so that it can be read by other women who can decide whether to continue or not with their procedures but are aware of the damages and losses they may face if they choose to use MOTIVA brand prostheses. The lifting of judicial secrecy may prevent other women going through a similar situation of pain and suffering experienced by the complainant.”  [Pg. 2]
The woman received MRIs at two facilities, including a lab recommended in consultation with an Establishment representative. In both instances, artifacts created by the presence of the RFID microchips made it impossible to evaluate the condition of her nearby breast tissue:
A representative from the second clinic told us by phone that the MRIs were performed at 1.5 Tesla, well within the guidelines published by Establishment, which states that its RFID chips are MRI-safe up to a maximum of 3 Tesla.
In the 2020 follow-up examination, the lab once again stated that it was unable to do a full and conclusive examination:
“A magnetic artefact related to the metallic material of the implant envelope limits the evaluation of the breast tissue.” [MRI results Pg. 5]
De Santana Silva´s lawyer summed up the situation saying:
“This Plaintiff is currently extremely shaken, regretful and afraid of developing breast cancer and not being able to early verification, considering given that the two (MRI) exams she had carried were inconclusive.” [MRI lawsuit Pg. 6]
“The rigorous science and clinical data behind Motiva sets us apart from the competition.”
– JJ Chacon Q1 2021
A second Establishment claimed key differentiator is its unique surface technology that, according to the company, demonstrates positive clinical safety outcomes. [Slide 5] The company maintains that its SmoothSilk/SilkSurface texture causes lower inflammation and less cystic encapsulation than traditional smooth implants.  [Slide 10]
Establishment also reported incredible-looking safety results in its initial go-public filings in 2018.
Out of 446,773 implants tracked internally by the company, Establishment showed far better results than competitors Allergan, Sientra and Mentor with less than 0.1%, or just 446 incidences of capsular contraction. It presented a similar figure for ruptures.
The company continues to point to its safety rate in annual filings, now with a data set of over 1 million implants and the same <0.1% figures. [Pg. 11, Pg. 13]
In the filings, Establishment also compared its data to competitors, showing that its rupture and capsular contracture rates were an order of magnitude better than competitors.
Establishment’s CEO, JJ Chacon, continually touts the strength of supporting clinical data on the company’s earnings calls. [ Q4 2018, Q1 2020, Q1 2021, Q1 2022]
Despite claiming to have 30 years of “advanced breast implant manufacturing experience” and tracing the creation of Establishment Labs back to 2004, there still appear to be no peer-reviewed, statistically-significant, scientifically methodical studies about the safety and effectiveness of Motiva implants or their performance relative to comparable brands.
The data reported in Establishment’s SEC filings is company-collected data.
This is likely why international health authorities have expressed concern about lack of independent data regarding Motiva implants.
France´s governmental National Committee for the Evaluation of Health Devices and Medical Technology (CNEDiMTS) pointed out these shortcomings in a circular specifically about Establishment’s Motiva implants, published in January 2022.
“The limitations of those non-specific studies are the following: non-comparative, monocentric for exploratory purposes, with a low number of patients included (only 35 in the study by Quiros et al.) with no information about the method of data collection or variation nor the threshold judged to be clinically relevant for the evaluated parameters. These studies were not carried out under directives of the (social security) care provider which thus limits all interpretations of the results.” (Translated from French)
It did, however, provisionally authorize listing Motiva implants – without the company’s RFID tracking microchips – on the register of social security approved devices for breast reconstruction, for 5 years.
The South Australian Policy Advisory Committee on Technology, an expert advisory body to the South Australia Health Department, made similar observations when issuing its opinion on Motiva implants in 2019.
The committee noted a complete absence of comparative, peer-reviewed studies on the effectiveness and safety of the implants. Like the French, it granted a restricted recommendation for the clinical use of the implants in breast reconstruction:
“There were no published peer-reviewed papers that focused on Motiva breast implants outcomes in breast reconstruction. No HTA reports or systematic reviews on Motiva breast implants were found. Through a comprehensive systematic literature search in 34 published and grey literature sources, three observational uncontrolled studies (NHMRC level IV evidence) on breast augmentation were found and included in the review.”
The Australian committee also mentioned the lack of credibility of at least two of the three most often mentioned published studies.
“In terms of conflicts of interest, Quiros 2019 is an industry-funded paper, and Sforza 2017 is a co-funded industry supplement. Huemer 2018 is the only paper of which the authors declared no conflicts of interest and they do not have any financial interest in Motiva breast implants.”
Australian regulators failed to note that Dr. Georg Huemer, co-author of the Huemer study, also had a long-standing association with Establishment Labs promoting Motiva implants, as we detail in the following section.
The lack of long-term clinical data is in stark contrast to implants that are already available in the U.S. Despite Establishment’s claim of “industry-wide complacency”, competitors Sientra, Mentor and Allergan all have completed 10-year clinical studies, post FDA approval.
French health authorities noted the only “specific” Motiva study was conducted by Huemer [Pg. 10], referred to as Huemer et al., published in June 2018. South Australian authorities also noted the Huemer study was the only 1 of the 3 referenced where the authors declared no conflicts of interest or financial interests.
At the time the study was published, Dr. Huemer had in fact a long-standing relationship as brand ambassador and key opinion leader (KOL) for Establishment. He had been a guest speaker for Motiva in 2013 and in 2015. In 2016, he was at Establishment Labs’ “World Symposium on Ergonomic Implants” – a grandly named annual sales promotion event – speaking to hundreds of invited plastic surgeons in Italy. 
We contacted Dr. Huemer to learn more about his experience with the company. In a phone interview, he voiced criticism of Establishment and told us he had stopped using Motiva because of surgical problems.
“I stopped using those implants for a number of reasons. I did the research and published my first 100 patients and my experience with them. And it was more a matter of the implant surface that I felt was not 100% right for me because the surface, the nano surface, it´s not completely smooth…and what I experienced with my technique, I had more problems in terms of implant mobility. That means after a couple of months or one or two years, if the patient lies down in the prone position the implant slides laterally. That is because the implant itself it doesn´t grow in so much.”
In his relatively small 2018 study (n=100), Dr. Huemer published complication rates of 7%, almost 10x higher than those published the previous year in a much-touted study by Dr Marcos Sforza. He says his data led to a backlash from Establishment:
“When I published this paper they were really a little bit angry with me. But I think it´s much more trustworthy if you have also some critical comments on them. But if you say it works 100% of the time it can´t be trusted I think. They have this KOL (key opinion leader) he´s called Marcos Sforza…he’s really their frontman in terms of clinical experience. And he also approached me because they had…a few years ago they had this Motiva world congress, it was held at Lake Garda in northern Italy (2016) for a couple of years. When I was bit [on] the team with the clinical team members, they approached me and said why did you publish this. You know what I mean? They were not really amused about my paper because it was also published of course in the best journal.”
“They´re really aggressive marketers. That´s not bad per se but you know they don´t accept any criticism. I don´t want to talk too badly about them now but I just say they have to face also a little bit problems.”
Huemer said other former Establishment brand ambassadors also reported problems with the implants at Establishment´s 2016 sales conference:
“When I was at their congress, the first time that Motiva, we had a colleague from Saudi Arabia or the Emirates and she presented a case where she had a really big displacement of the implant which really went down to the upper stomach. It slipped down to the stomach. I could relate to the surgeon because I said yes that´s the problem. That’s the main problem.”
We identified 4 key studies that Establishment has relied on to make the case for the safety of its products:
Establishment’s largest study, which followed 5,813 breast augmentation cases and was published by a team led by Dr. Marcos Sforza a year before its IPO in 2017, appeared to show stellar results.
Establishment featured the study in its IPO prospectus as its most extensive, key third party data. “This independent study was not commissioned by us…” the company wrote in its prospectus. [Pg. 4]
Sforza’s study found a complication rate averaging just 0.76% which he estimated in a later publication was “almost 10 times less than any other devices in our practice.”
Despite Establishment’s claims of not “commissioning” the study, it still appears riddled with conflicts of interest. The company noted in its prospectus that Dr. Sforza was a member of its medical advisory board and received compensation from the company. [Pg. 4]
Further, a “Funding” disclosure at the bottom of the published study notes that the “article was supported by Establishment Labs, who co-funded the development of a supplement to the study.
The executive publisher of the Aesthetic Surgery Journal, Phaedra Cress, told us that Dr Sforza´s study had been reviewed by “three or more peer reviewers” but declined to identify or characterize them. She said the “publication and dissemination” of the special supplement, entitled “Hot Topics in Aesthetic Surgery” in which Dr. Sforza´s study appeared, had been paid for by Establishment and three other companies but declined to specify the amount.
Disclosures also noted that Sforza’s institution had entered into a supply agreement with Establishment Labs roughly 3 years prior, and owned equity options in Establishment.
The study retrospectively reviewed the outcome of implant surgery between April 2013-2016 conducted at a single clinic, Dolan Park Hospital in the UK.
The clinic was owned by Hospital Medical Group. [Pg. 6] Dr. Sforza was the group´s scientific medical director, according to his Establishment corporate biography.
Almost a year before the cornerstone study was published in 2017, the company that owned the clinic and employed Sforza had gone into liquidation. The clinic had been battling a group action lawsuit in UK courts since 2012 over its use of faulty breast implants and was also facing massive financial problems as a result of the clinic´s use of the defective, scandal-hit PIP implants, along with millions of dollars in unpaid tax bills.
From at least April 2013, less than a year after the restructuring plan and with the medical group facing millions of dollars in legal claims, Sforza began using Motiva implants with his patients. In April 2014, Establishment Labs signed a supply deal with Hospital Medical Group offering them implants for an up to 75% discount. [Exhibit II]
In this climate of financial desperation over breast implant scandals and multilayered conflicts of interest, the clinic and doctor led Establishment’s marquee study.
In April 2019, the same Dr. Sforza, also claimed an “expert consensus” recommended use of Motiva implants.
“Overall, there was consensus that Motiva implants caused fewer complications than other implants, including contractures and ruptures.”
Two months later, Establishment Labs issued a press release about the findings called “Expert Consensus Recommends Sixth Generation Motiva Silicone Breast Implants”.
In the release, Niamh Corduff, M.D., member of Establishment Labs’ Medical Advisory Board, declared that Establishment is solving problems that other manufacturers have failed to address:
“The implants’ cell-friendly smooth surface minimizes capsule formation and reduces complications, problems that previous and current implant manufacturers have failed to adequately address.”
Establishment’s press release failed to disclose that 7 of the 8 authors of the “expert consensus” report were directly associated with Establishment Labs. It also didn’t mention that funding for the study was provided by Establishment Labs.
The published study disclosed that all but one of the authors were consultants, shareholders and medical advisors to Establishment Labs and that Establishment “supported” the study. The disclosures also do not state Chacon-Quiros is the brother of Establishment CEO JJ Chacon.
Upset at seeing such a conflict-laden “study” appear in the journal, plastic surgeons from Italy and Argentina wrote a letter-to-editor of the Aesthetic Surgery Journal, which was printed in October 2019.
The letter described the Sforza “expert consensus” paper as an “electronically delivered questionnaire via Survey Monkey”.
It added that “the workflow followed by the authors is far from being evidence based”:
“It could be considered a sponsored paper, but this would not justify presenting a misleading message for the community of plastic surgeons; the authors need to under-line how the data in the paper only represents the opinion of a small number of plastic surgeons without evidence deriving from the analysis of peer-reviewed published literature.”
In June 2021, Establishment announced “landmark breast implant surface research” in a press release that referenced a behind-the-paywall study published in the journal Nature Biomedical Engineering.
Establishment’s press release said:
“Professor Robert Langer and a team of MIT scientists demonstrated that an optimal breast implant surface architecture leads to significantly lower levels of inflammatory foreign body response and to healthier tissue capsule formation.”
“…surfaces with the SmoothSilk architecture showed a significantly lower level of immune response and the most healthy and biocompatible tissue capsules compared to either completely smooth implants or those with rougher surfaces.”
Commenting on the study in a Q2 2021 earnings call, Establishment CEO JJ Chacon highlighted the study results and stressed the legitimacy of the study:
“Nature Biomedical Engineering is a well-recognized and respected journal in its field. And the Nature journals are the most demanding in terms of their review process.”
Establishment’s most recent investor presentation uses data attributed to JC Doloff, according to a footnote, to show that Motiva has a far better immune response than traditional smooth implants. [Slide 10] Doloff is a lead author of the Nature study.
What Establishment’s press release failed to disclose is that at least 15 of the 24 co-authors of the study had ties to the company either as advisors, managers, shareholders, paid consultants or otherwise employees. The behind-the-paywall full report shows this is a company study from top-to-bottom:
“J.H., A.B., B.K., T.A.P and R.L. are members of the Scientific Advisory Board of Establishment Labs Holdings and each hold equity in the company. M.S. and A.M.M. are members of the Medical Advisory Board and each hold equity in Establishment Labs Holdings. M.W.C. and B.M.K. are Investigators on the US IDE Clinical Trial for the Study of Safety and Effectiveness of Motiva Implants. R.D.M., N.A.R., Y.E.H. and I.M.L. are employees of Establishment Labs S.A., and hold equity in Establishment Labs Holdings. J.C.D. and O.V. are paid consultants for Establishment Labs S.A. For a list of entities with which R.L. is involved, compensated or uncompensated, see the listing in the Supplementary Information.” 
Despite the research supposedly trying to make an “apples to apples” comparison on matters like implant surface roughness, it didn’t include comparisons to Establishment’s direct competitors like Allergan and Mentor’s smooth models (instead inexplicably comparing to rougher models).
Below is the surface roughness of each implant tested.
Allergan sells smooth implants with .3-.2 µm roughness under the brand name Traditional Smooth. Mentor also sells a 10 µm under the brand Mentor Smooth. Respectively, they are smoother or comparable to Establishment.
The reason for these omissions seems obvious: this was a one-sided study conducted largely by Establishment-compensated personnel for advertising purposes.
Most recently, in April 2022, Establishment Labs announced promising results from its FDA IDE clinical trials, an ongoing trial of an investigational medical device under an FDA-approved Investigational Device Exemption.
Preliminary data showed a very low capsular contracture rate at 0.5%, and a 5.7% reoperation rate.
Caroline Glicksman, the Medical Director and Principal Investigator of the trial, is quoted in the release saying:
“The Motiva IDE study is still in its follow-up phase, but the high rate of patient follow-up and preliminary clinical results are encouraging…As a study investigator on this rigorous PMA Study, I am proud to be a part of providing women in the United States access to a new class of options in breast implants.”
Glicksman runs a plastic surgery practice in Sea Girt, New Jersey. She was also a principal investigator in studies for a range of Allergan´s Biocell textured implants [1, 2]. Despite winning FDA approval, they were subsequently banned globally over concerns they were contributing to causing a type of cancer know known as BIA-ALCL.
She has been a long-time advocate for silicone implants. In 2003, when silicone breast implants were still banned in the U.S., she emerged as a vocal champion for their reinstatement during FDA panel hearings, according to her website.
Motiva is not the first time Glicksman has reported impressive looking early-stage results in silicone implant studies.
Almost two decades ago, in 2003, Glicksman appeared before the FDA to talk up a low capsular contraction rate for a silicone implant brand later bought by Allergan:
“To date, I have implanted 130 women with over 300 silicone implants. I have followed these patients for close to five years with no reported systemic illness and a capsular-contracture rate of less than 1 percent. You have before you the data, the science, but I would like to talk to you as a physician and a woman.”
Final reported study data for Inamed silicone implants differed drastically from Glicksman’s claimed results.
Allergan reported study data showing a capsular contracture rate of 13.2% for a 455-person primary augmentation cohort 4 years into the study. [Pg. 14]
Another 940-person study for Inamed’s implants published in 2007 showed an even higher capsular contraction rate of 15 to 20% at 6 years in.
Caroline Glicksman was also principal investigator on multiple studies showing the effectiveness of the now-banned Allergan 410 Biocell textured implants. [1, 2]
At the 2003 FDA meeting, Glicksman noted she had no financial affiliation to any corporation.
“DR. GLICKSMAN: Distinguished panel members, I have no financial affiliation to any corporation. I have come to testify before you today as both a plastic and reconstructive surgeon and as a woman, wife and mother.”
She went on to work closely with Allergan promoting the disastrous Natrelle 410 implant that used a “biocell” textured surface. From 2013 to 2015, Glicksman gave multiple presentations on Allergan’s Natrelle 410 implant.
In 2013, Glicksman wrote the How To Guide for Allergan’s 410 implants, which had been recently approved by the FDA.
A 2014 Allergan Biocell piece published in Aesthetic Surgery Journal noted that Glicksman was a paid consultant for Allergan. The piece stated:
“The benefits of low capsular contracture rates, rippling, and rotation far outweigh the very small risks of double capsule and late seroma.”
In 2018, Glicksman authored an Aesthetic Surgery Journal piece detailing double encapsulation, using Biocell implants. She disclosed being a paid Allergan consultant.
In 2019, the FDA requested the recall of Natrelle 410, along with multiple other lines. The FDA found that the implants were linked to Breast Implant Associated Lymphoma (termed BIA-ALCL).
CMS’s Opendata portal shows that Glicksman had reported over $350 thousand in payments for her efforts, 99% coming from Allergan.
Patient advocacy groups have argued that the FDA trials methodology is fundamentally flawed – corporations providing their own scientific data about the safety of their own products rather than any impartial, independent study.
In a June 2022 op-ed, Robyn Towt, co-founder of a leading patient advocacy group, cancer survivor and breast implant illness (BII) sufferer, wrote:
“A small group of plastic surgeons and their society leaders have played a key role in promoting the use of breast implants and how the public views the safety of breast implants. These surgeons have extremely close ties to the medical device industry, accepting hundreds of thousands of dollars from the device manufacturers in the form of gifts, travel, food and beverage, consulting fees and speaking engagements… The small group of key players hold positions on the executive boards of medical societies, research foundations, CME companies and medical journals.”
We talked further with Towt by phone. Referring specifically to Establishment´s Motiva trials, she said:
“Literally the same people who were telling us Allergan 410s were the greatest breast implants on the market six years ago and now they´re recalled for causing cancer. These are the same people doing your Motiva clinical trials.
These are same people trying to tell you we´re in charge of the BII (breast implant illness) studies. Why should we believe them? Why should we trust them, why should we trust their studies? Why should we trust their data? They´ve literally caused cancer in who knows how many.
There are millions of women that have those Allergan 410 implants. Pat McGuire and Caroline Glicksman flew all around the country promoting those and teaching surgeons how to use them and implant them and then they just drop us, kick all those patients to the curb like yesterday´s garbage and just focus on your new prize, your new shiny new toy and just keep moving on and moving forward. What about all these sick women?”
Industry competitors and experts that we spoke to were highly critical of Establishment Labs´ promotion of their implants as being safer than others in the field.
One veteran industry sales expert, with experience of working for a direct competitor, told us:
“So it´s a nice marketing story but is the reality really real? That’s sort of the MO with Establishment Labs. They’re great at creating a story but what does that really look like?”
They noted that the biggest issue for Establishment was lack of clinical data to support its aggressive claims. The expert also noted that the smoothness of Establishment’s implants, which the company touts as a feature, actually poses safety risks.
“A lot of people were moving to textured because it is more stable in the body, if a female is walking running or doing summersaults whatever, that implant is so much more stable and solid, and stays within the cavity, it won’t flip it won’t turn. Now you’re seeing a lot more flipping. Textured fits cavity better.”
He noted that he had heard from doctors in an initial clinical study who were seeing a lot more ‘drops’:
“…[dropping] we used the word drop, there’s quite a few in their initial clinical study, … those doctors were very concerned about the amount of drops that was occurring. It was more than what you want to see…it’s not holding to the cavity”
Another senior marketing executive with more than two decades of experience in the implant industry currently works for a leading international manufacturer. They also warned that Establishment´s claims about innovation were more aggressive marketing than evidence-based data:
“100% marketing x2. They are good at it to be fair to them.”
Aside from competitors, patients also suggest Establishment puts sales over safety.
Establishment Labs describes Brazil as a key market. [Pg. 4]
The most recent published survey by the International Association of Plastic Surgeons (IAPS) shows that Brazil is the #2 market in the world with more than 172,000 annual procedures or 10.6% of worldwide breast implant surgeries. (For context, that is roughly half the U.S. figure.)
Establishment Labs launched its Motiva implants in Brazil in June 2017. Already, on-going court cases and consumer complaints indicate that many consumers are dissatisfied with the devices.
As of October, 2022, we identified almost 60 complaints about Motiva implants posted over the past 3 years on a respected Brazilian consumer complaints website.
Brazil´s Reclame Aqui (Translation: “Lodge Your Complaint Here”) states it is the largest online consumer complaints platform in Latin America with 30 million registered users, set up 20 years ago.
The vast majority of complaints referred to Motiva implants rotating inside bodies, causing patients pain and extreme embarrassment. Some explained how the implants failed to adhere to the surrounding tissue, moved around and became displaced.
At least one explained how one of her implants had totally ruptured – forcing her to fly back to Brazil for emergency surgery. Among other complaints we found were (see Appendix C):
Many of the women who complained said they had to undergo multiple corrective surgeries, which did not always resolve the problem. Many also complained that Motiva representatives failed to follow up or give an adequate response.
Establishment Labs appears to be aware of the significance of the website and had replied to a majority of the complaints, albeit with a mostly boilerplate response.
Beyond complaints, lawsuits are beginning to make their way through the courts. Kathleen Nascimento de Paulo, a 29-year dental student from Rio de Janeiro, underwent breast reduction surgery in July 2019 and received Motiva implants.
Six months later in January 2020 she felt the left implant moving. After consultation, her plastic surgeon diagnosed that her Motiva implant was rotating and displaced. When she underwent corrective surgery in February 2020, surgeons detected the implant had ruptured in multiple locations and needed to be replaced.
Her lawsuit is on-going against Establishment Labs Brazilian subsidiary for moral and material damages.  Her lawyer wrote to the court:
“It is inadmissible for conduct of the defendant (Establishment Labs) to go unpunished because it provided material of extremely inferior quality to what is advertised – a defective product which did not meet safety standards.” [Pg. 13]
In its response to the court, Establishment Labs denied responsibility and said it was not able to produce an implant that was free from rotation – the original cause for Nascimento de Paulo´s corrective surgery – and suggested the other issues were due to medical error outside of its control:
“It is impossible for the manufacturer to produce a rotation-proof breast implant. The rupture, as will be seen, was visibly caused by a sharp object, not by any product defect.” [Pg. 201]
In 2021, Establishment announced that it had successfully enrolled 100 patients to pilot a system it had developed to revolutionize the entire augmentation industry by developing a technique to implant women via a small incision in the armpit using only local anesthesia.
An Establishment Labs Medical Advisor is quoted in the press release saying:
“We are at the dawn of a new era in breast aesthetics. In this series we were able to reproduce and prove the reality of this revolutionary concept based on a standardized combination of implants and tools.”
An investor presentation showed an office-based procedure that could take as little as 13 minutes, with “less patient anxiety and less risk” using “light sedation with local anesthetic tumescent solution.” [Slide 26] In the same presentation, Marcos Sforza described Motiva MIA as: “In my opinion this is a truly game changer for patients.” [17:15]
In October 2022, Establishment showcased the procedure in an event targeted at investors.
The presentation included a video of the procedure, which involves creating incisions under the arm pit, then shoving a large metal rod into a seemingly wide-awake woman’s chest. The surgeon then expands the pocket and inserts the implant through another large device.
Establishment said it plans to scale and expand its MIA program in 2024. [41:00]
Contrary to Establishment’s claims, a quick check of medical research reveals that use of local anesthetic has been on offer for years. The technique of transaxillary insertion, where the implant is inserted through a small incision in the armpit, has been reported since the 1970s and has been widely available in some parts of the world for almost 20 years.
In 2010, a New York Times story indicated there were around 100 doctors offering the procedure using only local anesthesia, but indicated that other doctors seemed highly skeptical. The New York Times noted that doctors couldn’t do their best work — dissecting a pocket for an implant, then securing it — without total control. There is also a real risk that patients have panic attacks while on the operating table. Another doctor described patients screaming during awake procedures:
“Patients can scream and you would know, I can’t be doing that, I can’t be putting my needle there…”
An Italian research paper published in 2018 followed 300 patients who had received tumescent local anesthesia, the kind now proposed by Establishment, in breast surgeries between 2010 and 2017. The paper reported it was a “safe and efficacious” procedure for sub glandular implants.
An item posted by a California surgeon on Plasticsurgery.org notes that doctors can do local anesthesia, but general is the safest option for most patients.
Further sources confirm local is a widely available as an option. [1,2,3,4,5,6,7]
Establishment Labs estimates that the procedure alone will double its Total Addressable Market (TAM), an increase of 1.9 million procedures. [Pg. 52]
Establishment arrived at this number by estimating the number of women wearing padded bras, and discounting that by a percentage based on those surveyed that had done, or would be interested in doing “coolsculpting” – a completely non-invasive procedure to freeze stomach fat, in which no cuts are made and no anesthesia of any type is used. [Pg. 53] Establishment followed up with individual market surveys that it claims validate the original study, according to its October 2022 presentation. [33:00]
Even in the current market environment where TAM calculations often seem to be wildly optimistic guesses, Establishment´s estimate is one of the most bizarre we have seen.
We find it hard to believe that Motiva MIA will meaningfully expand the implant market at all because local anesthesia procedures seem to incur just as much, if not more risk than the traditional surgery, which is already fraught with negative health outcomes. If local anesthesia had great potential, it likely would have gained market share 10 years ago when it was being promoted.
Beyond undisclosed conflicts of interest with its research, our review of Establishment’s current sales raises several questions around its financials.
Since 2019, Establishment has shipped $9.5 million of implants to what appears to be an undisclosed related party distributor in Mexico.
Import aggregator Tradesparq shows that since 2019, Establishment has shipped $9.5 million of product to an entity called MedSurgical Mexico S.A. De C.V.
|Value shipped ($ millions)||4,905,322||5,815||4,648,525||28,380|
Establishment CEO Chacon listed himself as a “self-employed” Director of MedSurgical from Jan 2000 – Jul 2008, according to his LinkedIn biography. Chacon handed over leadership of the Costa Rica entity to his siblings in 2011, according to corporate filings.
While Chacon’s Linkedin says he left MedSurgical in July 2008, Mexican entity records show he incorporated MedSurgical Mexico in December 2008 and officially registered it in February 2009.
No share sales or transfers have been publicly recorded for Medsurgical since the initial incorporation, though not all updated corporate filings in Mexico are made public.
We spoke with Cinthya A. Hernandez Faugier, who is currently listed as Medsurgical Mexico’s administrator on corporate filings. She confirmed that Chacon had held shares, but that he sold them years ago.
Nonetheless, shipments are still being directed by Establishment to the once tightly-controlled family business. Import records show one of MedSurgical’s addresses matches another “third party” Motiva distributor.
Export/import listings obtained from Tradesparq list “Calle Napoles 85” as an address for MedSurgical. [1,2]
We visited the address, located in an office building, and security staff told our investigator that MedSurgical had been based there until “about four years ago.”
The fifth floor of the Calle Napoles 85 address matches a registered address for Establishment distributor Zaria Med, according to the data protection statement on its website.
And according to Establishment, its distributors are exclusive, and an October 2020 press release issued by Zaria Med indicates that Zaria Med is the exclusive distributor of Motiva for the Mexican market. [Pg. 1]
The distributor’s director is Cinthya A. Hernandez Faugier, according to the same press release. Mexican corporate filings show she founded the company in November 2009.
But since February 2016, Cinthya A. Hernandez Faugier has also been the administrator of MedSurgical according to Mexico entity filings. Prior to that she was head of MedSurgical’s finances, according to those same corporate filings.
According to another LinkedIn profile, a “Cinthya Anel” is also country manager for MedSurgical.
To recap, Establishment’s key supposed independent distributor in Mexico shares an address and leadership with an entity that was founded by Establishment’s CEO. Establishment has been exporting to the CEO’s former entity for unclear reasons, per export records.
Establishment does not disclose any transactions with MedSurgical as being related party transactions in its annual reports or its S-1 prospectus. [1,2,3,4,5]
We visited Establishment’s Mexican distributor, Zaria Med, at its official registered address to see what entity was operating at the site and to learn more. We found it was located at an unmarked building in a lower-income area in Eastern Mexico City called the Iztapalapa district. 
The address was located near a number of other different types of small businesses, per our investigator.
Our investigator talked to neighbors who confirmed a company that sold implants was operating in the building. However, personnel inside the building declined to comment. Our investigator said they observed four people in the interior.
Given that this was a distributor for medical products, we expected there to be a relatively modern facility.
Our investigator said there was no visible signage nor a doorbell. Employees were observed sending phone messages for others inside to let them in.
On closer examination we saw that the windows were blocked out by bed sheets.
Establishment Labs’ current valuation relies on the assumptions that the company’s products are innovative, have a safety profile that is better than the industry average and will able to dominate the U.S. market.
Establishment’s closest publicly traded competitor, and the last leveraged competitor that tried to break into the U.S. market with claims of superior safety, Sientra, now trades as a penny stock.
Given all of the above, we believe Establishment’s valuation is very aggressive and anticipate substantial downside from these levels.
The modern breast implant industry has been besieged with controversy, conflicting medical claims and devastating litigation almost since the insertion of the first device by two U.S. plastic surgeons using silicone invented by Dow Corning in the early 1960s.
By 1998, silicone inventor Dow Corning was deep in bankruptcy proceedings and had agreed to pay $3.2 billion to settle the claims of more than 170,000 women who said their implants had made them sick.
The U.S. Food and Drug Administration (FDA) first listed implants as Class II medical devices from 1976. But in response to “frequent local complications and adverse outcomes”, including cancer, connective tissue and autoimmune diseases reported by women in the 1980s, the FDA reclassified implants as Class III devices in 1988, a higher risk classification.
In 1992, the FDA issued a voluntary moratorium –effectively a ban — on silicone-gel implants that was not lifted until 2006. Other regulatory authorities across the globe took widely different stances meaning that while opportunities may have closed in the U.S. others opened up in Europe, Latin America or Asia.
Upon the lifting of the U.S. ban, Dr. Sidney Wolfe, chief of Public Citizen’s Health Research Group, was quoted by the New York Times as calling silicone implants “the most defective medical device ever approved by the F.D.A. The approval makes a mockery of the legal standard that requires ‘reasonable assurance of safety.’ ”
Just as Establishment Labs launched its own range of breast implants in October 2010, the sector was getting rocked by its biggest-ever scandal. [Pg. 2]
Six months earlier, from March 2010, the worldwide PIP scandal began to publicly unfold. Up to 400,000 women worldwide learned that their PIP implants were not manufactured with clinical-grade gel but a far cheaper industrial silicone, creating a much greater risk of rupture and leaking among other problems.
The trial of five PIP executives and compensation claims from thousands of women worldwide made the case one of the biggest in French legal history. The final cost of compensation has still not been settled but PIP was forced into liquidation.
Litigation had not even concluded by the time the next global implant health scare flared up – exactly a year after Establishment Labs went public.
In July 2019, the FDA issued a recall of some implants produced by one of the market leaders, Allergan, amid a wave of international bans of certain textured silicone implants because of fears they were causing a rare type of cancer, known as BIA-ALCL. Allergan responded with a global recall.
A month ago, on September 8, 2022, the FDA issued a safety alert, highlighting new cases of cancers and lymphomas being found in scar tissue around breast implants, potentially setting the stage for a new wave of industry tightening.
Two years after MedSurgical was incorporated in 2002 in Costa Rica, another affiliate of the same name was created in 2004 in Panama, with Juan Jose Chacon, brother Marco Chacon and cousin Luis Manuel Gutierrez Chacon, listed as directors.
The following year, in March 2005, Medsurgical Iberoamericana was incorporated, also in Panama, which included Costa Rican lawyer Gonzalo Velasquez Martinez among the directors. Velasquez Martinez´s name also features on incorporation documents for Establishment Biotech a year earlier.
Spaniards Jorge Lopez Olmos and Jordi Aixandri Rotger were also listed as directors and appeared to be working for a French pharma company at the same time.
On his LinkedIn profile Aixandri lists his experience as a co-founder, CFO of MedSurgical and its general manager for Mexico, stating:
“Cofounded a business in Latin America, with headquarters in Panama and legal entities in 8 different countries. The company was importing and selling medical products to Plastic Surgeons and Dermatologists (e.g. breast implants, Botox) and achieved €5m Revenues in 2 years, employing c. 50 people.”
Lopez Olmos appeared alongside Juan Jose Chacon as director of a MedSurgical subsidiary in Argentina from at least 2006:
Lopez Olmos also appeared as one of the founding shareholders of the Colombian subsidiary MedSurgical Colombia in 2006. And by March 2007, the Chacon brothers Juan Jose and Marco, cousin Luis Manuel Gutierrez and Spaniards Jordi Aixandri were all listed as shareholders:
Archived versions of the MedSurgical website showed it distributed in at least 17 Latin American countries:
As the PIP scandal, and related litigation, gathered pace, the Colombian MedSurgical affiliate was dissolved and was no longer operating by 2013. The Peru affiliate had also ceased operations by 2013. By 2018, MedSurgical had been dissolved in Costa Rica and the two Panamanian entities were shuttered in 2019.
Carolina, from Itu, in Sao Paolo state, posted her complaint in July 2020. It echoed a common theme and was titled a “Dream Turned Nightmare ”:
“Unfortunately I was another victim of the terrible Motiva implants. The implants with the most technology on the market and everything else as the Doctor, whom I chose to make this dream come true, indicated to me…Around 6 months after the surgery, I noticed the first abnormal changes. Today I have a huge spacing between my breasts, they fall to the sides and down.”
Another consumer, who signed her January 2020 message with her full name, Kawana Tavares da Silva complained of one of the most potentially serious implant problems – rupture:
“I would like to express my dissatisfaction with the quality of the MOTIVA prosthesis. When changing my prosthesis one of them was very broken causing risk to me. I am dissatisfied and I will not recommend you and Motiva as I had done in the past to two other people who had breast surgery. I don’t live in Brazil and I had to come here just to change the broken prosthesis. This has cost me a great deal.”
Daiane, from Fernandopolis, titled her complaint “My Breasts Totally Invert”. She wrote in April 2022 how her implants began to sag, moved around and caused pain just six months after her initial breast augmentation in 2019. She said she required a second surgery to try and correct the problem but said that had not been successful:
“How can anyone live like that? I can’t bend over while showering because the implants rotate! During sex with my husband, I can’t do certain positions because again I go through an unacceptable and totally embarrassing moment: my husband has to stop to rotate my prostheses back! I just want to cry…It’s revolting to see the MANY COMPLAINTS about the Motiva prosthesis here on Reclame Aqui and even more revolting is to see the answers.”
In another message from the city of Leme in December 2021, a mother lodged a complaint on behalf of her 22-year-old daughter whose implants, she said, rotated. She requested a refund, prompting a variation of Establishment Labs´ normally boilerplate response:
“We also emphasize that Motiva does not have a refund or reimbursement policy for a surgical procedure. As mentioned above, all information about breast implantation must be previously clarified and oriented to the patient. In addition to the instructions given by the doctor, the implant is accompanied by instructions for use that also provide relevant information related to its use.”
“Motiva has a warranty that covers occurrences such as Capsular Contracture and Rupture after implantation. if these occurrences are proven, the patient will be entitled to a pair of implants equal or similar to the implants that will be removed. Other surgical costs and fees are not covered by the warranty.”
Bruna, from Maringa, in her July 2020 complaint, threatened legal action for what she believed was a widespread problem:
“I’ll be brief because I’m tired of complaining about it. ’l thought you won’t beat me by fatigue.”
“I had my surgery on 12/14/18, with less than 10 months my prosthesis had given way. I thought it might be my problem, but every day that passes I’m more sure it’s not. I am in contact with 15+ women with the SAME problem as mine.”
“I contacted the representative for my region, he viewed it and did not have the ability to respond to me. I am getting in touch once again, because I want my reimbursement as soon as possible. I paid for a product that was supposed to last for more than 10 years. It lasted less than one. I still have deformed breasts and the prosthesis under my armpit.”
“Please, I want a decent response, or else our conversation will be in court. Already, I and a bunch of other women are contacting lawyers. If it is not resolved in a humane way, we will file a joint action against the company.”
Establishment plans to submit its fourth and final FDA module in Q4 2022 but quick FDA approval is far from a sure thing. Over the last few years, the FDA has been tightening rules on implants, as evidence mounts about women getting mysteriously sick after receiving implants, often referred to as implant illness.
In October 2021, the FDA put out a black box warning for saline and silicone implants, requiring doctors to go through a check list of all the negative side effects that come with implants.
A long list of celebrities have recently made the decision to explant for health reasons. Chrissy Teigen removed her implants to “to experience pure comfort.” NASCAR celebrity Danica Patrick removed her implants in 2022, saying “I had tried for a year to resolve certain health issues and certain things going on that were outside of the norm and outside of what I thought there was a reason for it”
Ayesha Curry , the wife of golden state warriors star Steph Curry, had her implants removed in 2019, she wrote “I got mine out last year. They were making me so sick.”
Bella Hadid’s mother, Yolanda Hadid, had her implants removed in 2019, noting that they were floating around in her body potentially making her Lyme disease worse. She said,
“Your health is your wealth so please make educated decisions, research the partial information you’re given by our broken system before putting anything foreign in your body”.
In addition to celebrities explanting, anti-implant patient advocates are campaigning hard globally and lobbying the FDA and other health authorities worldwide to carry out more independent studies on the dangers of silicone implants.
One activist, Robyn Towt, received silicone breast implants after surviving cancer. She told us implant illness left her so sick “I can´t even open a bottle of Gatorade or a pickle jar”. She is a co-founder of the US-based Global Patient Advocacy Coalition. She told us:
“They (the implant industry) are still trying to sweep it under the rug and gaslight patients and say you´re not sick, your breast implants are not making you sick, your implants are safe, they´re FDA approved…I´m willing to give grace to people who didn´t know or didn´t fully understand the pitfalls of how dangerous these products were. But they know now. They totally know.”
Another activist, Jan Spivey, who was implanted with the highly toxic French Poly Implant Prothese (PIP), is founder of the PIP Action Campaign. She believes implant manufacturers are targeting susceptible women with fake science and partial evidence:
“The target audience are very vulnerable women whether or not they´re cancer patients, whether or not they´re women with body dysmorphic issues or whether they´re under a lot of pressure from the Twitter or Tik-Tok community. Those are real pressures that are applied to very young women to conform and to feel body positive. And there´s also this alternative narrative that there´s some kind of benefit from breast implants.”
Establishment Labs’ pivot from selling beauty products to manufacturing their own silicone implants was made possible, in part, by the arrival in Costa Rica of the Tourniaire family, who brought investment and know-how to Establishment.
In 2004, the Tourniaires sold their French family-run implant business Eurosilicone to corporate fraudster Donald McGhan, who financed the deal with cash stolen from another company he had acquired just days before. The deal forced his company into bankruptcy after creditors filed lawsuits and it landed McGhan in prison – he was jailed for 10 years for wire fraud in 2009.
Members of the Tourniaire family continued to work with McGhan until Eurosilicone was sold off as part of Chapter 11 proceedings, after creditors filed lawsuits over McGhan´s fraudulent financial transactions.
The Tourniaires were never implicated in the fraud. But it´s difficult to see how they missed major red flags regarding McGhan when they did due diligence ahead of the Eurosilicone deal.
McGhan had settled a financial fraud case with the SEC in 2000 and paid a $50,000 fine for making false and misleading accounting statements at a previous breast implant company he operated.
And despite announcing his intent to purchase Eurosilicone in May 2004, McGhan only found the funds for the $40 million purchase two days before the deal deadline expired. He funneled the cash, stolen from a business he had just acquired, to the Tourniaires at Eurosilicone via a shell company formed by McGhan´s wife and daughter, court records show.
The deal landed McGhan in jail.
Court documents from a case filed by the SEC, allege that McGhan paid $37 million to the Tourniaires, money that had been ransacked from client funds in a real estate investment company that McGhan had bought expressly to finance the Eurosilicone deal.
McGhan was sentenced to 10 years in prison on four counts of wire fraud in September 2009.
No legal action seems to have been taken to retrieve cash from Eurosilicone. A statement from the U.S. Attorneys office said McGhan had offered to make full restitution for the stolen funds.
Between June and August 2009, Establishment increased its share capital more than 6.5x thanks to investments from an unnamed individual.
The new shareholder is not specifically identified in Costa Rican corporate filings due to corporate confidentiality rules. But in August 2009, Olivier Tourniaire, a former sales director at his family-owned implant maker Eurosilicone, was appointed chairman of Establishment Labs – an indication that the cash injection came from him and his family.
A former senior finance executive for Establishment confirmed to us that the Tourniaries and the Chacon family were both vital to the launch of the implant manufacturing business:
“It was a combination of both. The experience of the Tourniaire family in Europe, the experience of the people who had worked in Allergan in Costa Rica and the experience as far as market knowledge in the Costa Rica aesthetic market of the Chacon family, who are the Costa Rican investors. It´s a family (the Chacons) with a long track record, a family of plastic surgeons who studied in France and have been part of the top level of plastic surgeons in Costa Rica for many years.”
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 JJ Chacon´s brother Marco admitted to Costa Rican media that Medsurgical had imported a “small” number of PIP implants to that country between 2003-2006. The newspaper report also indicates Medsurgical distributed in Guatemala, Nicaragua and Panama. Those claims minimizing their involvement contradict a statement on a partially recovered archive of the medsurgical.com website from 2005 which states the company: “only offers implants from Laboratoires Eurosilicone.” Eurosilicone was acquired in 2004 by Medicor Ltd in the U.S., which was also a major shareholder in PIP´s US-based parent Heritage Worldwide. [Source]
 Note that in addition to the ban of saline implants by PIP, all silicone implants had already been banned in the U.S (and were until 2006) “because of thousands of lawsuits claiming they leaked and caused connective tissue disorders and cancer”.
 Luis Manuel Gutierrez Chacon, a public notary and JJ Chacon´s first cousin, set up Medsurgical with administrator Wendy Varela Mata in June 2002.
JJ Chacon became general manager in July 2002. His wife, Carolina Hidalgo Delfino, was named chairman in 2004. Two of his brothers, Marco and Gilles, and two sisters Francine and Jenssie took over running the company in October 2011.
 Medsurgical expanded regionally to include at least 10 incorporated entities and a distribution network it said served at least 17 countries in Latin America. [See Appendix B]
 Chacon, a co-founder of Medsurgical Ecuador in September 2008, exited his shareholding there in September 2011, according to Ecuadorean corporate records. He was a director of Medsurgical Argentina from at least October 2006 and resigned that position in November 2011, according to notifications in the official corporate gazette. Shareholders are not publicly disclosed in Argentina, according to a corporate lawyer we consulted, so it is unclear who currently owns the entity. We phoned the current CEO of Medsurgical Argentina, Francisco Facio, and he told us he did not know whether Chacon was still a shareholder in the entity. He declined to offer any information about any other shareholder. Chacon appears in Mexican corporate records as co-founder of Medsurgical and the majority shareholder, but a representative suggested the filings are stale and explained that he has no ownership in the entity. Establishment makes no related party disclosure in filings relating to any Medsurgical entities. [See Part 3]
 In addition to silicone implants, Medsurgical also distributed post-operative compression belts and botox. [See Appèndix C]
 VeriChip IPOd as independent company in February 2007, estimating that 45 million patients in the US could benefit from the chips. [Pg. 4]
 After a biopsy showed signs of potential cancer, De Santana Silva was referred to a lab for an MRI but technicians suspended the procedure and said they could not complete it due to the presence of the Qid RFID chips inside the implants. [MRI lawsuit Pg. 2]
After consultation with her plastic surgeon and an Establishment Labs representative, De Santana Silva received an MRI at another clinic in December 2018. [MRI results Pg. 3] She received a follow-up MRI at the same lab 20 months later in August 2020. [MRI results Pg. 5]
 Establishment attributes this conclusion to J. Doloff at a 2017 breast implant symposium in Italy in a footnote
 The publication of his report, coupled with an exchange of letters-to-the-editor in a top industry journal, regarding an earlier report by Establishment´s Dr Marcus Sforza [Huemer´s letter, Sforza´s letter], in fact represents a public disagreement between two of Establishment´s key surgeon-promoters over the efficacy of the implants.
 On his website Dr Sforza boasts of having conducted 5,000 successful procedures and offers clients that he can help them “Get Your Dream Body”
 Exact dates of his employment there did not readily show up in an internet search, but in an Establishment press release announcing results of his study dated September 2017, Sforza said he had been a director at Hospital Medical Group for the previous 10 years, presumably since at least 2007.
 The Hospital Medical Group Deal cut the price to 100 GBP (~$169 at 2014 exchange rates). By comparison, Establishment was offering its implants to a German distributor in a 2018 agreement (Schedule 5) at between 2.3X and 4X higher (350-590 euros or $402-$678) than those sold previously to Dr Sforza´s UK institution.
 Those names and initials correspond to 15 of the 24 the authors listed on the title page)
 Glicksman is president-elect of ASERF, the research arm of the Aesthetic Society (also known as the American Society for Aesthetic Plastic Surgery) which describes itself as a “the world´s leading organization devoted entirely to aesthetic plastic surgery” with a membership base of 2,600 surgeons.
 Glickman’s CV, the provided date range, and the FDA hearing transcript indicate it was related to an FDA PMA approval study for the then-branded Inamed implants. [Pg. 2]
 Inamed was acquired by Allergan in 2005. Prior to that, Inamed had trademarked Biocell and developed style 410 implants. [Pg. 3]
 Each response was directed to the consumer by their first name but the wording appeared to be standard with some small variations: “We thank you for your report and clarify that Motiva is committed to investigating all occurrences received in order to provide an adequate treatment, seeking to guarantee your health and safety…The implants comply with the safety and efficacy criteria established by health and regulatory bodies in Brazil and by certifying bodies, recognized worldwide…Motiva is a company committed to women’s health and seeks, through technology and innovation, to ensure their well-being, our focus will always be on patient safety and satisfaction.”
 She received round, SilkSurface implants from Establishment Labs Produtos Para Saude Ltda., per the complaint.
 The other founding shareholder Carolina Flores Hine resigned as company administrator in 2016 according to the corporate filings but there is no indication through public filings that she sold or ceded her shares.
 A LinkedIn account shows Cinthya Anel H Faugier as country manager for Zaria Med, providing additional confirmation for the relationship.
 Mexican entity filings show the official registered address for Zaria Med is Segunda Cda. Calle 8 192, Granjas San Antonio, Iztapalapa, 09070 Ciudad de México.