US nod for dual-tech hearing implant should allow Cochlear to recoup lost sales

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The first device that combines a cochlear implant with features of a traditional hearing aid has been approved in the US. Cochlear’s Nucleus Hybrid L24 implant may be used in adults with “ski slope” hearing loss – severe to profound hearing loss in high frequencies and normal to mild hearing loss in low frequencies – in both ears.

The Australian company estimates that around A$33m (US$30m) in sales has been deferred over the past year or so as customers wait for this technology, so launch of the L24 could get off to a good start. And with campaigns for reimbursement of bilateral implantation of cochlear implants in adults gaining ground, the market for this and other devices could be set to grow.

True hybrid

The new system uses Cochlear’s Nucleus 6, or N6, sound processor – the part that sits behind the patient’s ear. The N6 translates sound into electrical impulses and feeds them into the brain through electrodes in the L24 implant. It simultaneously functions as a traditional hearing aid, amplifying sounds and transmitting them into the ear canal.

The N6 was approved in the US last summer, but without approval for the hearing aid feature and without the wireless connection to other devices such as telephones, based on the 2.4GHz technology that Cochlear licensed from GN Store Nord in 2011. In other words, until yesterday Cochlear could only sell the N6 as a standard cochlear implant. Now it is a true hybrid device.

Because Cochlear could not pitch the device as a hybrid, the initial launch was lacklustre, analysts at Bernstein say. The new approval could allow Cochlear to rectify this situation with the missing sales booked this calendar year.

The company has also operated a scheme since last April under which it has sold its older N5 processors with the promise of an upgrade to the N6 as soon as it becomes available. Thanks to this programme Cochlear has deferred revenue of A$6.8m in the US; the launch should boost sales over the next three months, helping first-half sales in the Americas to grow by around 5%, Bernstein analysts say.

Cochlear’s 2013 US sales are estimated to reach $302m, according to EvaluateMedtech’s consensus forecasts, growing 11% to $335m in 2014. If this does occur the effect will be manifest in Cochlear’s full-year financial results, which will be released in August, as the company’s fical year concludes on June 30.

Bilateral

If the sales do manifest as expected, Cochlear ought to be able to entrench its position as the top worldwide player in cochlear implants. It currently has around 65% of the global market, followed by Med-El and Sonova’s Advanced Bionics subsidiary, each in the high teens. The fourth group is William Demant, which bought its way into the sector in April; it has share of just 2% or so (William Demant moves into fast-growing cochlear implant sector, April 3, 2013).

Because of this, Cochlear is best placed to gain from campaigns to permit the reimbursement of bilateral cochlear implants in adults, and these are gaining ground, particularly in the UK. The National Institute of Clinical Excellence recommends bilateral cochlear implants for children only; the NHS will only fund a single implant for adult patients.

In the US, reimbursement varies widely, according to Cochlear, with Medicare plans ambiguous. The firm also says few Medicaid programmes officially cover bilateral implantation. The US National Institute on Deafness and Other Communication Disorders estimates the total cost of implantation of a cochlear implant to be $60,000 per patient.

Cochlear and its rivals would be unwise to rely on lobbying efforts to governments and insurers as a means of growing the market. But the L24 allows Cochlear to address a segment poorly served by either available technologies. At the very least, it is a better option than using a cochlear implant in one ear and a hearing aid in the other.

To contact the writer of this story email Elizabeth Cairns in London at elizabethc@epvantage.com or follow @LizEPVantage on Twitter

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