Industry

ReSound Alera Success Drives GN Store Nord Hearing Aid Sales To 9% Global Growth And 23% Growth In U.S.

ReSound’s Alera hearing aids have put the Denmark company back on a strong growth track, with parent GN Store Nord reporting its hearing aid business revenues grew nine percent worldwide in the first fiscal quarter of 2011, with growth in the healthy North American market growing 23 percent. ReSound Alera high-end hearing aids feature like wireless connectivity, sophisticated sound processing software, and other advanced features. And in February 2011 ReSound announced availability of its new innovative “Remote Microphone” form factor for the Alera hearing aids, with the microphone sitting in the ear’s cymba concha and the speaker and sound-processing chip sitting deep within the ear canal.

“In Q1, we saw encouraging topline growth driven by ReSound Alera™ and the corresponding Beltone True™ family, including the wireless accessories,” said GN ReSound CEO Lars Viksmoen. “Organic revenue growth reached 9% mainly as a result of the first wave of form factors launched in 2010. During Q1, we launched the second wave of form factors and based on the experience so far we are adjusting the revenue guidance for 2011 upwards.”

The announcement came close to top competitor Sonova’s preliminary year-end fiscal announcement that its Phonak and Unitron hearing-aid sales grew more than 10 percent in its 2010-2011 fiscal year.

Sonova Reports 10 Percent Increase In Hearing Aid Sales And Resumes Cochlear Implant Shipments

Sonova Group, parent of the Phonak and Unitron hearing aid brands, issued a preliminary financial report announcing that its hearing-aid sales increased 10.1 percent in the 2010-2011 fiscal year, powered by strong market acceptance of its high-end hearing aids based on its new Spice sound processing hardware and software platform.

The Swiss holding company also announced that it is resuming sales of its cochlear implants outside the U.S. following approval by European regulators of manufacturing changes that it says solved its product quality problems with its Advanced Bionics cochlear implants following a worldwide recall after problems surfaced with several of its implants. The company also said it is filing notice of the manufacturing changes with the U.S. Food and Drug Administration (FDA) to gain approval for resuming sales in North America as well.

Sonova, which was rocked by an insider-trading scandal that resulted in the resignations of its chief executive officer and chief financial officer in April, said overall sales for the group, which includes its implant business as well as hearing protection products, grew 7.8 percent in the fiscal year. The company said it will report complete results for the fiscal year on May 24.

New Siemens Aquaris Hearing Aids Are Waterproof

The new Aquaris waterproof hearing aids from Siemens Hearing Instruments have taken the recent industry trend toward more durable, water-resistant hearing aids to a whole new level. Siemens says the Aquaris hearing aids are fully waterproof to depths of three feet for up to 30 minutes.

The new hearing aids promise to eliminate the repair problems associated with sweat, dirt and humidity, in addition to expanding their functionality: Siemens has even developed a sound-processing program that can be switched on while swimming to help the hearing aids adapt to the sound of water splashing and other acoustic challenges.

The company describes the technology developed for the new waterproof hearing aids in its news release:

A scratchproof, rubber-like surface holds the device securely behind the ear and prevents it from slipping. The battery compartment is equipped with a waterproof but air-permeable membrane. As a result, environmentally-friendly zinc air batteries can be used, which always require “air to breathe”. The cover clip is attached to the top of the casing via ultrasound. It also protects the waterproof but acoustically transparent microphone membrane, which was specially developed for Aquaris. A nano coating and a seal protect the earpiece.

As with its other latest-generation hearing aids, Siemens equipped Aquaris with its BestSound Technology, which improves speech understanding, the wearer is able to make adjustments using Siemens “Tek” and “miniTek” remote operation, and the hearing aids link wirelessly with modern communication and entertainment electronic devices.

How Big An Impact Will Departures of Sonova CEO and CFO Have On The Company’s Hearing Aid Brands?

The resignations of Sonova Group CEO Valentin Chapero and CFO Oliver Walker following improper stock transactions was an unwelcome surprise to a hearing aid industry still struggling to revive sales growth following the global economic recession. Sonova is the world’s leading hearing aid manufacturer, owner of well-known brands including Phonak and Unitron (hearing aids), Advanced Bionics (cochlear implants), and Lyric extnded-wear hearing aids. Chapero was an industry leader known for a strategy that combined aggressive investments in new technology and expansion of sales channels as well as growth through acquisition. His abrupt departure raises obvious questions about what effect the changes will have the hearing aid brands sold by its subsidiaries.

The management shakeup came after the Sonova board of directors determined that a March 16 financial projection warning of lower than expected sales and profits should have been made earlier, and that Chapero, Walker and other insiders with knowledge of the impending lower forecast sold stock before the announcement, avoiding a loss in the value of their shares when their prices fell after the public announcement. Sonova Chairman Andy Rihs, who built the company from a family-owned hearing-aid concern to a publicly held global leader, also stepped down from his position as chairman, but he remains on the board of directors. Swiss regulatory authorities are investigating.

The Sonova board’s quick appointment of Alex Zschokke as interim CEO and Paul Thompson as interim Chief Financial Officer made it clear the company intends to continue on the course charted by Chapero. Zschokke has run Sonova’s marketing and retail operations and has been a motivating force behind the company’s drive to develop and introduce new products based on its new Spice sound processing platform. And Thompson is a long-term Sonova financial executive whose most recent position was Group Vice President of Corporate Development.

At this week’s American Academy of Audiology (AAA) AudiologyNOW conference in Chicago, Sonova brands will make multiple announcements demonstrating continued forward motion: Phonak will be introducing a new member of its Naida high-power hearing aid family based on the Spice platform, Unitron will introduce its new Era sound processing platform that shares many of the Spice platform technologies, and the company’s Sona brand will introduce another version of its field-upgradeable hearing aids.

But now the company must deal with a major unexpected change in its leadership and an insider trading investigation, even as it continues to work its way out of the problems that caused the March 16 profit warning, including a recall of its Advanced Bionics cochlear implants. When I wrote that Sonova hit a “speed bump” with its March 16 profit warning, little did I know it was also about to land in a pot-hole.

Sonova To Write Off Up To $200 Million In Losses Associated With Advanced Bionics Cochlear Implant Recall

The bad news for Sonova Holding AG, the world’s leading manufacturer of hearing aids, is that it will have to write off up to 200 million Swiss francs (CHF) or $217.8 million USD, to cover losses associated with the global recall of Hi-Res 90K cochlear implants made by its Advanced Bionics subsidiary. The good news is that it can afford to absorb the loss, even in a 2010-11 fiscal year when market conditions have prompted a revised forecast for slower growth than in the previous year.

Sonova, parent of leading global hearing aid brands Phonak and Unitron as well as Advanced Bionics, also issued an update on its guidance for financial analysts projecting 40-50 million CHF less in sales growth than an earlier forecast. That translates into 7 percent revenue growth versus the original projection of up to 10 percent growth. The company also said operating profits would be in the 20-21 percent range, approximately 20 percent lower than the earlier forecast of up to 26 percent operating profit. Sonova attributed the slower-than-anticipated growth to “an unclear regulatory situation in the U.S. market,” which has delayed the launch of new Phonak hearing instruments, as well as a slowdown in Unitron’s sales growth.

Additionally, the company said it would revise its 2009-10 fiscal year financial statement to reflect the goodwill impairment write-off of between 150 and 200 million Swiss francs to cover losses from the Advanced Bionics cochlear implant recall.

While the report made it clear the Sonova juggernaut has hit a speed bump, the company indicated it is intent on maintaining its position as the world’s number-one hearing-aid company with continued investments in new products and technologies. In addition to predicting continued growth with solid profitability, it also said it is expanding its new Spice sound processing platform, first introduced with Phonak products, to the Unitron hearing aid line, with multiple product announcements expected at next month’s AAA Congress in Chicago. Sonova is also working to fix the problems that prompted the recall of the Advanced Bionics cochlear implants, which are expected to drive growth and profitability for the parent company in future years.

However, the global hearing aid market leader’s slowdown gives both Oticon parent William Demant and ReSound parent GN Store Nord an opportunity to gain ground on Sonova. Both recently issued upbeat financial reports for 2010, crediting their success in part to strong sales of the new Oticon Agil and ReSound Alera hearing aids.

Oticon And ReSound Corporate Parents Report Strong Financial Results Driven By Agil and Alera Hearing Aids’ Success

It was a good year for Oticon and ReSound, which got a turbo-boost in sales growth from their introductions of new flagship Agil and Alera hearing aid families.

Oticon’s corporate parent William Demant Holding reported 21 percent revenue growth with strong profitability for its 2010 fiscal year, driven by the success of the new Oticon Agil hearing aid family. William Demant Chief Executive Niels Jacobsen told Reuters that William Demant recaptured its position “as the fastest growing player in the hearing aid industry” in 2010. It also increased its market share with the 2010 acquisition of Otix Global, maker of Sonic Innovations hearing aids, but still is chasing Sonova Holdings, parent of Phonak, the global leader in the hearing aid industry.

ReSound parent GN Store Nord also ended 2010 on a high note, reporting 10 percent fourth-quarter growth with strong growth in profitability for the year. GN Store Nord Chairman Per Wold-Olsen attributed the strong end-of-year results in part on the successful launch of the new ReSound Alera hearing aid family.

HearUSA Lashes Back At Siemens With A Lawsuit And Gets Support From A Principal Investor

HearUSA to Siemens: Right back at you! Responding to an SEC filing in which Siemens Hearing Instruments threatened an unfriendly takeover following a dispute over the terms of a loan payment, hearing-aid retail chain HearUSA said it filed a suit in the Supreme Court of the State of New York seeking a declaratory judgment to prevent Siemens from making good on its threat. At the same time, Arcadia Capital Advisors, one of HearUSA’s largest institutional investors, issued a news release supporting HearUSA and accusing Siemens of “a ruse so that they can steal the company at depressed valuations.”

In a Schedule 13D filing on Jan. 18 with the U.S. Securities and Exchange Commission (SEC), Siemens said it was considering exercising an option to buy out HearUSA following the Orlando, Florida-based company’s failure to make a timely debt payment. HearUSA Chairman and CEO Stephen Hansbrough responded immediately, scolding Siemens for a “negative and heavy-handed approach,” before following up with its announcement this week of the New York Supreme Court suit. Arcadia Capital Advisors chimed in with its own public statement, saying Siemens “is choosing to play the role of a bully” and accusing Siemens of trying to acquire HearUSA at a fire-sale price: “The recent SEC filing by Siemens smells strongly of market manipulation,” said Arcadia Capital Managing Director Richard S. Rose. “We believe their actions are a self-serving scare tactic, so don’t be surprised if Siemens comes out with a low-ball offer for the company.” Read more

Sonova CEO Says Recall Of Advanced Bionics Hi-Res 90K Cochlear Implant Might Be Over By April

Bloomberg News confirmed that Sonova Holding AG is working feverishly to fix the problems that spurred a global recall of the Advanced Bionics (AB)Hi-Res 90K cochlear implant and hopes to end the recall as early as April or at the latest by the autumn of this year.

Sonova CEO Valentin Chapero Rueda earlier this week indicated in an interview with the Swiss newspaper Handelszeitung that the AB cochlear implants could be back on the market by April, but a Sonova spokesperson clarified the projection in the subsequent Bloomberg story, saying “There’s also a likelihood it could be autumn. Nothing’s final.” Read more

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