Advanced Bionics, Cochlear’s main rival, had more woes to contend with – several of their implants failed recently and they blamed it on one of their suppliers. This sent Cochlear’s share price soaring and presumably, celebrations with champagne at their HQ.
With further damage to their reputation - their third recall in 4 years – their quality control record seems to get spottier and spottier. Advanced Bionics needs to clean up their act if they want to compete on an equal level with Cochlear.
News from Reuters:
MELBOURNE, March 10 (Reuters) – Shares in Cochlear Ltd., the world’s top maker of hearing implants, soared 17 percent to a record high on Friday after its rival Advanced Bionics voluntarily recalled some of its implants.
In an “urgent recall” letter dated March 8, obtained by Reuters, Advanced Bionics told clinics that several of its implants had failed recently due to internal moisture, which it blamed on one of its two suppliers of a specific part that connects the sealed section of the implant with an electrode.
Advanced Bionics, owned by Boston Scientific Corp. said it would send out replacement implants with parts made by the better supplier.
Cochlear Chief Executive Chris Roberts said it was too early for the group to upgrade its full-year profit forecast on the back of its rival’s problem, as it was not yet clear how quickly Advanced Bionics would be able to replace the faulty implants.
“It’s a bit premature to make any assumptions about that at this stage,” Roberts told Reuters.
“The major benefit to us is the further reputational damage to Advanced Bionics rather than a particular market share move.”
Cochlear shares surged 17.2 percent to a new peak of A$55.01 in a flat market, surpassing the previous high hit in November 2001.
A recall of Advanced Bionics’ HiRes 90K implant in 2004 due to moisture problems helped Cochlear reclaim U.S. market share last year, which the group has built on further this year to around 70 percent with its newest implant, the Nucleus Freedom.
It was not clear how many implants Advanced Bionics had recalled this time, Roberts said.
Cochlear would have a better idea about potential gains when it hears from clinics whether they want more Cochlear implants or are just postponing operations while they await replacement implants from Advanced Bionics, he said.
Spokesmen at California-based Advanced Bionics and the head of Advanced Bionics’ auditory division, James Miller, did not respond to calls, and there was no note on the group’s product Web site (www.bionicear.com) about the recall.
“This is the third recall in four years, and is a disaster for reputation,” Citigroup said in a note to clients.
“We would expect Cochlear to gain the majority of the short- term market share and secure medium-term market share as ABC’s reputation slides,” it said.
Cochlear forecast in February that its core annual earnings would grow by 37 percent to at least A$80 million ($58 million) this year.
“You can assume people will upgrade their numbers because this will help Cochlear hold on to, if not gain, market share,” said an analyst with a fund manager who declined to be named.
