Cochlear Limited (ASX: COH) is the global leader in implantable hearing solutions with an estimated 70% of the global market. Following the recall of its Nucleus 5 implant in 2011, Cochlear's market share has come under pressure from competitors such as Sonova who have closed the technological gap on Cochlear. The share price has also fallen over the past three years, falling from over $80 in 2011 down to $63 today. However, what does the future hold for Cochlear?
In June of this year, Cochlear announced that it will be relaunching its C1500 series implant in Europe after voluntarily recalling the product in 2011. Cochlear has stated that this implant is the thinnest implant on the market and will support a wider range of surgical techniques. The product is set to be rolled out into other countries in the near future pending regulatory approval. Cochlear also launched its Nucleus 6 product in the United States and Europe and reported positive feedback on these new products, expecting sales growth momentum into FY15.
Cochlear estimates that its devices are currently only penetrating a very small percentage of the addressable market – possibly as low as 1%. The cost of the implant simply makes it too expensive for a lot of people. However, increasing wealth from emerging countries and increased levels of government healthcare spend in the developed world will likely result in Cochlear increasing sales growth rapidly over the long term.
Cochlear has a superior reputation for technological innovation and reliability in a highly specialised medical field. It also holds key intellectual property over its products which give the company a strong competitive advantage. While the current share price is not cheap and may fall by over 10% in the short term, I believe Cochlear will grow strongly over the next decade and the share price will be significantly higher in years to come.
