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April 19, 2004

INTERVIEW: Cochlear Says US Probe "Not Too Distracting"

From: Yahoo News - USA - Apr 19, 2004

By Richard Noonan

SYDNEY (Dow Jones)--Australian hearing aid maker Cochlear Ltd. (COH.AU) said Monday an ongoing U.S. Department of Justice probe into the company's financial relationships with doctors isn't distracting management efforts to revive earnings.

Speaking from Sydney after returning from his first trip to the company's European operations, Cochlear chief executive Chris Roberts said its lawyers are continuing to collect documents for the investigation and that discussions have started with the District Attorney's office.

"It's not too much of a distraction," he said in an interview with Dow Jones Newswires.

Roberts, who joined Cochlear from Resmed Inc. (RMD.AU) earlier this year, said no charges or allegations have yet been laid against the company. The probe may be "a four to six month process," he added.

Shares in Cochlear slumped 16% to a four-year closing low of A$18.90 last month after the company revealed the Department of Justice asked its U.S. unit to hand over documents related to the relationships it has with doctors that buy and install its ear implant devices.

Cochlear warned that costs associated with the probe would be "significant" and dent earnings in the current half year ending June 30, 2004.

Questioned whether Cochlear has factored in any costs associated with the probe, Roberts said the company will probably update the market midyear.

"We'll come up with a position at the end of the half," he said, declining to be any more specific.

Based on similar cases in the U.S., some local analysts have factored in a potential settlement of about A$60 million and legal costs of up to A$8 million for Cochlear.

Separately, Roberts said Cochlear has hired an executive search firm to find a successor for Jim Miller, the company's U.S. president who last month defected to arch rival Advanced Bionics Corp.

Roberts said he isn't in a hurry to find a successor to Miller, and will take his time to find "the right person" for the company's biggest unit.

Cochlear, which makes about half of its sales in the U.S., issued two profit warnings late last year, partly due to strong competition from Advanced Bionics in the U.S. and slower sales growth in its other large market in Europe.

Roberts said there won't be any management changes at the company's European business, noting Cochlear's people in Europe are "excellent."

"I'm impressed with what's happening in Europe," he said, declining to be comment further.

Shares in Cochlear closed up 15 cents at A$19.88.

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