Cochlear shares take a dive on news of recall

Cochlear Limited saw its shares plunge in Australian trading after announcing a voluntarily recall of its unimplanted Nucleus CI500 cochlear implant range.

Less than 1% of CI512 implants have failed since product launch in 2009, but it has identified a recent increase in the number of failures, according to a company recall notice. The recall is only for units on shelves, and all existing implant recipients can continue to use their system as normal, according to the company. If a failure does occur, the implant safely shuts down. 

As of now, the impact of the recall is unknown. "We don't know how many are out on the shelves," Neville Mitchell, Cochlear's CFO, said in a phone interview with Bloomberg. "I have no idea how many we will have to recall." However, analysts are already buzzing about the recall, saying it could hurt the company. "This recall is potentially a big deal," said Angus Gluskie, who manages more than $300 million at White Funds Management in Sydney, as quoted by Bloomberg. "The CI500 range is Cochlear's primary implant device, and a recall may impact short-term earnings, as well as possibly damaging its reputation. Cochlear has recalled the device on its own initiative, so we'll be interested to see if they're able to rectify matters in a short time."

And although the number of device failure seems to be limited, the company may still face a bumpy road ahead. "We rate broader impact as negative to reputation as Cochlear was the only peer without a major recall,'' said Andrew Goodsall, a healthcare analyst at UBS, as quoted by the Sydney Morning Herald.

There might be limited sales impact in the U.S., however, where surgeons are likely to switch to Cochlear's old implant, Goodsall added. Rival Advanced Bionics is working through regulatory clearances to return to the that market after a recall, according to the Australian.

- see the recall notice
- get more from Bloomberg
- check out more from the Sydney Morning Herald
- read the Australian report