Cochlear possibly faces short term weakness

From: Australasian Investment review - Sydney,Australia - Nov 8, 2004

Australasian Investment Review – (AIR)

Cochlear's main competitor, Advanced Bionics (AB), is back in the market just 1.5 months after its forced retreat for the second time in two years.

While the event does not mean anything to Cochlear's guidance for the year, GSJB Were believes it may put current market consensus expectations under pressure. After all, nobody believed it would only take 1.5 months for Advanced Bionics to return.

The circumstances between the two events have changed quite considerably, the broker highlights, so it would be dangerous to make too many comparisons and conclusions.

For starters, AB's new owner Boston Scientific (BS) has the capacity to invest to regain lost sales, but as AB's cochlear sales barely represent 1% of the group's revenues, GSJBW assumes the business is not considered high priority.

The broker nevertheless believes that Cochlear's competitor will come back "much like a wounded lion (…) fighting".

"We don't discount the competitive threat this poses to Cochlear, but consider that the damage to AB may have already been done", the broker states, adding "it will be an interesting test of Cochlear's new marketing focus to see whether it can capitalise on this opportunity."

GSJBW remains positive on the long-term outlook for Cochlear and would look to use any short term share price weakness as a long term buying opportunity (Marketperform/LT Buy).

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