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April 20, 2004

Cochlear listens in to US investigations

From: - Australia - Apr 20, 2004

20/04/04 By: James Seabrook

Dr Chris Roberts, the CEO of Cochlear Limited (COH) revealed yesterday in an interview conducted by Dow Jones that the US led investigation into the organisation's financial relationships with doctors is not disturbing management's efforts to breathe life into the company's earnings. The CEO, who joined Cochlear from Resmed Incorporated (RMD) earlier this year, explained that the investigation could extend over four to six months, but no charges or allegations have yet been laid against the company.

"It's not too much of a distraction," Dr Roberts said to Dow Jones Newswires.

However not long ago, the Australian based hearing aid manufacturer advised shareholders that the costs associated with investigations would adversely affect earnings for the six months ended 30 June 2004.

The Dow Jones interview revealed that Cochlear has yet to factor in any costs associated with the probe, with Dr Roberts advising that the company would probably update the market at the end of the half.

This lack of transparency, combined with the fact that the company, which makes about half of its sales in the US issued two profit warnings late last year, might explain the group's shares sliding up to 16% to as low as $18.90 over the past month.

Continuing, the CEO told Dow Jones that the Department of Justice asked its US unit to hand over documents related to the relationships it has with doctors that buy and install its ear implant devices.

In response, the Dr Roberts has said that the company's lawyers are continuing to gather documents for the inquiry, and that discussions have started with the District Attorney's office.

On the outlook, Dow Jones has said that some local analysts have factored in a potential settlement of about $60 million and legal costs of up to $8 million for Cochlear.

At 1230 AEST, Cochlear shares had risen 2c to $19.90.