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January 12, 2005

US break for Cochlear

From: Melbourne Herald Sun, Australia - Jan 12, 2005

Olga Galacho

INVESTORS in bionic ear maker Cochlear finally heard some positive news yesterday when the US Government said it might expand hearing implant subsidies.

The announcement helped Cochlear shares advance 3.5 per cent, or 92c, to a 13-month high of $26.94.

Some analysts estimated the plan to lower the hearing loss threshold for reimbursement could boost Cochlear's sales by 300 units or nearly $3 million.

A Goldman Sachs JBWere analyst said such an increase had the potential to lift estimated full-year earnings for 2006 by about 5 per cent.

Before yesterday's announcement consensus forecasts for 2006 net profit were around $58 million.

This financial year, Cochlear is expected to post net earnings of about $52.5 million, following last year's disappointing $36.7 million.

The past two years have seen the stock hammered by profit downgrades, restructuring costs and poor unit sales.

"The US Government plan is clearly a positive after a string of negatives," one analyst said yesterday.

Cochlear sells about 3500 units a year in the US, including about 300 to people over 65.

It is the over-65s who would benefit most from any increased subsidy, potentially lifting Cochlear's sales to 600 units for that market.

The US Centres for Medicare and Medicaid Services said that under the current policy, a patient must demonstrate a test score of 30 per cent or less on sentence recognition to attract an implant subsidy.

The revised policy would cover implants for test scores of 40 per cent or less and up to 60 per cent for patients in approved clinical trials.

CMS estimates there are more than 25 million Americans who have a hearing loss, including one out of every four people older than 65.

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