Investing in Cochlear Implants with Cochlear
We’ve talked before about artificial hearts that can pump blood throughout your body while you wait for a transplant. We’ve looked at bionic eyes that enable basic vision for the blind. Continuing on the theme of artificial anatomy, there is one company that can provide you with bionic ears and it’s called Cochlear.
Founded in 1981, Cochlear (ASX:COH) is an Australian company which is said to have captured 65 to 70 percent of the global market for hearing implants. The Company has a market cap today of $3.37 billion USD and trades on the Australian Securities Exchange (ASX). With 5 new product launches in Fiscal 2015, Cochlear (ASX:COH) has a track record of innovation, and currently holds over 1,100 patents and patent applications globally. Their primary product offering is the cochlear implant which is a small electronic device that helps to provide a sense of sound to a person who is profoundly deaf or severely hard-of-hearing. The implant consists of an external portion that sits behind the ear and a second portion that is surgically placed under the skin.
So what’s the difference between a cochlear implant and a hearing aid? While hearing aids simply amplify sounds for those who are hard of hearing, a cochlear implant will bypass damaged parts of the ear and communicate directly with the auditory nerve. You may have seen many of the heartwarming videos that show people’s reactions when they hear sounds for the first time in their lives using cochlear devices. While a cochlear implant can cost as much as $100,000, there is no substitute for being able to hear. Over 324,000 people worldwide have received cochlear devices as of 2012. The devices are FDA approved, and most insurance companies and Medicare will provide benefits that cover the cost. Sales of these devices have shown strong growth over the past 9 years as seen in the below table:
The numbers in the above table are AUD, so multiple by .72 to express them in USD. Cochlear has managed to double their revenues over the past 9 years with 43% of revenues come from the Americas, 40% from EMEA, and the remaining from the APAC region. For fiscal 2015, investors were disappointed with the dividend payout decreasing 25% year-over-year. Cochlear is also undergoing a planned CEO change which was the result of a well-planned succession. So how many potential devices could cochlear sell? According to the World Health Association, over 5% of the world’s population – 360 million people – have disabling hearing loss which means that there are 15.9 million potential customers in the U.S. alone.
Cochlear could make for an attractive acquisition candidate as the Australian dollar is down -20% in the past year alone and approaching lows not seen since the financial crisis of 2007-2008.
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