HEARING implant maker Cochlear could be in for an earnings windfall after one of its key competitors began recalling a faulty product.
Shares in the world's biggest ear implant maker jumped more than 4 per cent yesterday after rival Advanced Bionics announced a global recall of its HiRes90k implant.
The recal follows complaints of pain and electric shocks shortly after activation.
Cochlear, which claims its new Nucleus 5 implant is a game-changer, has previously benefited from Advanced Bionics recalls, and analysts said it could mop up most of its rival's 15 per cent global market share.
Cochlear has about 70 per cent of the global cochlear implant market, with the remainder shared between unlisted MedEl and Advanced Bionics, which is a subsidiary of Swiss major Sonova.
"Advanced Bionics has an unfortunate chronology of recalls dating back to 2002, and this recall may rate as the last straw for many centres," said UBS analyst Andrew Goodsall, who upgraded Cochlear to a buy and increased its price target from $78 to $82.40.
"We rate it unlikely Advanced Bionics will return to market inside six months. We expect Cochlear to take the lion's share of the market."
The news saw Cochlear shares close 2.66 per cent higher at $76.87.
Credit Suisse analyst Saul Hadassin said Cochlear could increase earnings per share by 8 per cent in full-year 2011 if it won 90 per cent of Advanced Bionics' market share.
On Citi's numbers, if Cochlear wins just 70 per cent, it could make $US50 million ($51m) in gross profits a year for as long as the recall is in place.
But Morgan Stanley said lack of clarity on the number of implants to be withdrawn and the malfunction's cause made it hard to assess how long Advanced Bionics would be out of the market.
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