Cochlear has dominated Med-EL and Advanced bionics for the last 10 years but their reign is about to cease. This will not happen overnight but my prediction is that in 5 years Cochlear's markeshare will have dropped from 70% to around 50% and will continue to decrease rapidly. Most analysts predict Cochlear will continue to dominant the world CI market but my assessment is different.
The CI market was previously a niche field but what we are about to experience is a convergence of technology between the traditional hearing aid market and the CI market. This has caught the interest of heavyweights in the traditional hearing aid market.
It is clear that people value discretion and therefore the long-term trend is that more and more hearing aids will become implantable. Cochlear clearly is the market leader in cochlear implantation which is suitable ONLY for moderate to severe losses. Such technology will never be suitable from mild losses (too invasive and their are clear limits to sound resolution). However when it comes to middle ear implantation and deep ear canal devices (significantly larger market potential), Cochlear is not.
There is a misconception in the market that CIs are far more advanced than traditional hearing aids. Certainly with regard to the very specific cochlear implantable technology they are, but their signal processing technology is atleast five years behind traditional hearing aids. Cochlear freely admits this. Traditional hearing aids are now using technology such as binaural wireless signal processing, bluetooth audio streaming, learning etc The IP for this is not easily accessed.
We have seen the commencement of this convergence when a heavy weight from the traditional hearing aid market: Sonava (Phonak) (market capitalisation over 4.5 Billion Aud) bought Advanced Bionics. Sonova brings a lot of this signal processing technology to the Advanced Bionics CI technology.
This clearly had cochlear running scared. Recently Cochlear attempted to purchase Siemens Hearing Aids (est market capitalisation of 3 Billion Aud). This sale fell through. Cochlear is in a dilemma now. They know they cannot maintain their dominance in the long-term in isolation but they also know any play to acquire a traditional hearing aid company is high risk. Such a play will involve a multi-billion dollar acquisition.
COH Price at posting:
$72.79 Sentiment: LT Sell Disclosure: Not Held
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