Cochlear regains ground

Homegrown bionic ear maker Cochlear continued to rally investor support today on the back of news its US rival Advanced Bionics had withdrawn its device from sale.

Shares in Cochlear were up almost 13 per cent at the time of writing today to trade $4.30 stronger at $37.70.

The stock also attracted some institutional support, with Credit Suisse First Boston building its holding in the company by almost 604,000 shares for a 9.6 per cent stake.

The gains built on Tuesday's rally, when news that Advanced had removed its product from sale over fears of a heightened meningitis risk lifted the local stock $4.20 to close at $33.40.

This contrasted against the losses of the previous two market sessions, during which Cochlear stock plummeted to a 20-month low of $27.

Earlier this week analysts predicted that investors would stop punishing Cochlear as soon as Advanced Bionics clarified its position.

They said there was nothing fundamentally wrong with the company to warrant the sell-off, adding that the only impact on Cochlear of the meningitis fears would likely be short-term sales as parents of potential child recipient postponed their consent for the operation.

A spokesman for Cochlear was unavailable for comment today.

The US Food and Drug Administration advised last week that at least 25 ear implant patients worldwide had contracted meningitis and nine of them had died. While the FDA did not name Advanced Bionics in its advisory, the company itself said it was urging its patients to be vaccinated against various pneumococcal diseases.

On Tuesday, investors became aware that the US company had posted a message on its website saying it was investigating whether the "electrode positioner" used with its Clarion cochlear implant might increase the risk of meningitis.

"We have therefore decided to suspend the distribution of the Electrode Positioner with our product until we have a better understanding of the reported cases of meningitis," Advanced Bionics said on its website.

Last week, the Cochlear implant's creator Graeme Clark said the increased meningitis risk was a result of the US product's design, whereby an electrode was placed within the ear via the middle ear using a positioning device.

This could leave a gap between the electrode and the positioning device that could trigger infection between the middle ear and the brain.

Clark said there had been no cases of meningitis among recipients of the Australian device.

Additional reporting from Reuters