Cochlear Shares Plunge After Recall of Hearing Implants
MEBOURNE, Australia – Cochlear Ltd., the world's biggest maker of bionic ears, Monday recalled its latest range of hearing implants after a recent unexplained increase in failures.
Cochlear shares plunged as much as 27 percent after Chief Executive Chris Roberts said the Australian-based company had stopped manufacture of the Nucleus CI500 range, which in the 2011 fiscal year made up 70 percent of the company's sales of implant units.
Analysts said the recall could lead to prolonged market share gains for Cochlear's competitors such as the Austria-based Med-El. Cochlear has about 65 percent of the global hearing implant market.
"Reliability is very important," Roberts said. "If there's some things happening that we don't understand, we're far, far better to stop and understand it ... rather than just battle ahead and hope it all works out."
Roberts said there are about 25,000 registered users of the CI500 range and the company is not recalling those products that have already been implanted.
The company said it identified a recent increase in the number of Nucleus CI512 implants failing in recent weeks, with less than one percent of CI512 implants failing since they were launched in 2009.
If failure occurs, the implant safely shuts down without injuring the recipient, the company said, adding that if it does fail, the patient could be re-implanted with the earlier model Nucleus Freedom implant range.
UBS cut its recommendation on Cochlear from neutral to sell and cut its price target from AU$76 to AU$60 ($78.64 to $62.09). The broker said "longer-term reputational fallout is likely to overhang market willingness to pay a premium for a previously unblemished market leader."
On Monday afternoon, Cochlear shares were down 20 percent at AU$57.60.
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