Hearing device manufacturer, Cochlear Limited (ASX: COH) has seen its shares fall 1.4% today. At lunchtime they were trading at around $59.15. By comparison, the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) is up 0.4%.
The reason appears to be fears that the company is losing market share to Swiss rival Sonova. Yesterday, the Australian Financial Review (AFR) reported that Sonova's cochlear implant business, Advanced Bionics, grew revenues by 54% in the 12 months to March 2014, to CHF195 million (A$236 million).
The strong growth was driven by the launch of a new processor, Naida, which competes against Cochlear's Nucleus range of processors. Sonova said upgrades to the new processor accounted for 20% of its implant revenues, suggesting the other 80% was new customers – likely many who may have considered Cochear's product, before going with the Naida.
Cochlear also launched a new processor, the Nucleus 6, in the US last year, but it is a scaled back version, pending further approval from the Food and Drug Administration (FDA) for the full scale version.
The company's CEO Chris Roberts has previously indicated that he expects the application to be discussed before the end of this year. And it's likely that until FDA approval is forthcoming, Cochlear will lag behind its competitors. The Australian company is still believed to have a 60% share of the implantable device market globally, but that is down from 65% more recently.
Cochlear has struggled ever since the company was forced to recall its flagship hearing device in 2011. FDA approval of its latest processor could be a make or break deal for the company.
But it's not like the company hasn't faced similar threats before. In 2003, the company said the release of a competitive product would see market share fall by 5%-10% in the USA, and the company reported a 37% fall in net profit after tax for the 2004 financial year.
Since then, earnings per share have more than doubled, despite the current issues.
With worldwide demand for hearing implants likely to continue to grow, now may be a good time to add Cochlear to your watchlist.
