IM this article to a friend!

October 22, 2002

Cochlear Forecasts 40 Percent Increase in First-Half Earnings, Shares Rise

From: Bloomberg Australia
Oct. 22, 2002

Sydney, Oct. 22 (Bloomberg) -- Cochlear Ltd. shares had their biggest gain in almost three months, surging 13 percent after the world's largest maker of inner-ear hearing devices forecast first- half earnings per share will rise more than 40 percent.

A similar gain may be recorded for the full year, after rival Advanced Bionics Corp. withdrew its products from the U.S. market, Cochlear Chairman David Penington said at the annual shareholders' meeting. U.S. regulators have said the hearing devices may be linked to meningitis, a potentially fatal brain disease.

Cochlear stock, which has tumbled more than a quarter this year partly on the meningitis scare, rose A$3.99 to A$33.93 at the 4 p.m. close of trade on the Australian Stock Exchange.

The profit forecast ``is certainly substantial growth and allays a lot of fears that the market was having about'' possible links between its products and meningitis, said Ross MacMillan, equities strategist at Commonwealth Bank of Australia. He plans to review his profit forecasts after the company's comments today.

Cochlear has increased its global market share to almost 70 percent from 65 percent, since Advanced Bionics withdrew its hearing device from the U.S. market in July, Penington said.

``We predict an increase in earnings per share of more than 40 percent in the first half,'' Penington said. ``It is still early, but earnings for the full year could be of the same order. It's clear to us that we gained significant market share.''

Sydney-based Cochlear is maintaining its long-term earnings per share growth target of 25 percent a year and sales growth target of 20 percent, Penington said.

`Safe' Product

The U.S. Food and Drug Administration said patients with ear implants may be susceptible to infection. Cochlear has said its studies show the incidence of meningitis in its users is similar to that of the general population.

``We have no doubts about our product,'' Chief Executive Jack O'Mahony said in an interview after today's meeting. ``There is nothing wrong with our product from a safety aspect.''

Two months ago, Cochlear forecast profit growth of at least 25 percent in its current fiscal year. Net income in the year to June 30, 2002 rose 29 percent to A$40.1 million ($22 million), or 77 cents a share. Profit in the six months to Dec. 31, 2001 rose to A$17.2 million, or 32.9 cents a share.

Cochlear was forecast to report net income of A$58 million in its 2003 business year, according to the average estimates of 12 analysts surveyed by Thomson First Call.

Cochlear has boosted net income by more than 20 percent the last five years, and now holds almost 70 percent of the market for hearing devices for the severely deaf.

©2002 Bloomberg L.P.