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November 9, 2004

INTERVIEW: Australia's Cochlear Gains Share -2-

From: Dow Jones - Nov 9, 2004

MELBOURNE (Dow Jones)--Australian ear implant company Cochlear Ltd. (COH.AU) said Tuesday it gained some market share on Advanced Bionics Corp. after its U.S. rival was out of the market for six weeks due to a product recall.

Speaking from the U.S., Chief Executive Chris Roberts said some patients switched to Cochlear's implants from Advanced Bionics after the recall was announced, while some others delayed surgery.

"We believe it was a positive for us absolutely," Roberts told Dow Jones Newswires in an interview.

"We definitely gained something" in market share, he said, declining to elaborate.

Advanced Bionics is owned by Boston Scientific Corp. (BSX)

Late September, Advanced Bionics issued a global recall of all unimplanted Clarion and HiResolution implants after a review of internal complaint records pointed to potential malfunctions of the devices.

The recall, which didn't affect patients who had already received an implant, was triggered by concerns that moisture in the internal circuitry could potentially cause the devices to stop working.

On Friday, Advanced Bionics said it had resumed distributing all its devices.

Roberts noted that Advanced Bionics initially told customers it would be out of the market for seven-to-10 days.

Asked about the timing of its rival's return after six weeks, he said: "I guess that's no surprise. We estimated maybe four weeks. We were expecting them back."

While Cochlear lured some customers, Roberts declined to comment on whether it will be able to retain the additional market share.

Even so, Roberts said Cochlear has been more aggressively marketing the reliability of its products during the recall period.

"We believe reliability is a really important issue for patients and surgeons," he said.

"It's important we get that message out there. We're not being shy in discussing the importance of reliability," he added.

Roberts also said the market will remain competitive.

"This is a very competitive marketplace," he said.

"We expect them to continue to be aggressive and we anticipate matching that."

Shares in Cochlear have surged more than 20% to as high as high A$25.89 since the latest recall was announced. At about 2315 GMT, the stock was 0.9% higher at A$25.70.

Investors have been betting the recall may help revive the company's sales, which have been hurt in the past year by a resurgent Advanced Bionics.

Some analysts also think the reputation of Advanced Bionics may again temporarily suffer with patients and surgeons as a result of the recall.

The recall follows a similar incident in 2002 when Advanced Bionics withdrew devices on concerns about a potential link between its implants and a higher incidence of meningitis.

Cochlear was able to take short-term advantage and increase its market share in the U.S. to 70%, but has since dropped back to about 60% after Advanced Bionics returned to the market with revised products.

-By Richard Noonan, Dow Jones Newswires;
-Edited by Ian Pemberton

Copyright © 2004 Dow Jones & Company Inc. All rights reserved.