Cochlear Shares Dive After CI500 Recall

Hearing device company Cochlear (COH) saw its shares plummet yesterday after it declared a global recall of its Nucleus CI500 line due to a spike in product failure rates. Shares dropped over 20 percent to $57.50 as terrified investors sold out en masse.

The CI500 series accounts for about 70 percent of Cochlear sales and pulling it off the market cost the company more than $800 million in stock value.

Cochlear said it a statement that there had been "a recent increase in the number of Nucleus CI512 implant failures" and the recall was voluntary "in an abundance of caution."

The company has never recalled a product, and said the failure rate of the device was below 1 percent since its 2009 launch. As an alternative, Cochlear recommended its previous Nucleus Freedom range to surgeons.

Analysts said the recall could eat up as much as 12 percent from the company's earnings each year for the next two years.

Wilson HTM analyst Shane Storey said: "The sharemarket (sell-down) seems to be an overreaction, but at the moment nobody is in any mood to give anybody the benefit of the doubt."

Last month Cochlear posted a profit of $180 million for the year to June, with revenue up 10 percent.