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September 22, 2004

Cochlear hears rumblings in US

From: The Australian, Australia - Sep 22, 2004

By Helen Matterson
September 22, 2004

BIONIC ear-implant maker Cochlear has warned that conditions in its key US market will remain challenging for the short term.

In the company's annual report released yesterday, it cites lower growth trends in the industry in the US, clinic capacity problems and the ongoing issues of awareness and reimbursement as the key US challenges.

The report says that while these will be tackled in the 2005 financial year, it will not translate to better sales immediately.

However, the company says that over the medium to long term, the outlook in the Americas region is for strong growth.

In August, Cochlear delivered a 37 per cent drop in net profit to $36.8 million after a year marred by several profit downgrades.

The US market was one of the main weak spots with strong competition resulting in a 5 to 10 per cent loss in market share, although market leadership was maintained.

One factor that contributed to lower sales was a slower uptake of a recently introduced neonatal screening program. "Neonatal screening for the early detection of implant candidates was expected to lead to rapid uptake by those patients who would benefit," say chairman Tommie Bergman and chief executive officer Chris Roberts in their joint address.

"The time frame for adoption is longer than initially anticipated."

Cochlear said the development of a new type of implantable hearing device had the potential to broaden its market, with the first of these implanted in a human in August.

The company is also due to release its fourth-generation implant system commercially in 2005.

The report says the recent strategy review overseen by Dr Roberts since he came on board in February has highlighted the potential for "robust medium to long-term growth".

This is also consistent with long-term incentive plan targets of about 20 per cent compound average annual growth in earnings per share over a three-year period, it says.

The annual report shows Dr Roberts earned a total package of $415,951 for the year to June 30 and former CEO Jack O'Mahony received $910,000, including $300,000 in "leaving benefits".

Cochlear shares firmed 1c to $21.50.

© The Australian