Recovering from Setbacks

Bad news beset two major players in the neurotechnology industry this month. Market leader Medtronic Neuromodulation received a warning letter from the FDA related to the company’s process of handling complaints. The company acted quickly to assure the market it would work with the FDA to resolve the matter.

Perhaps more ominous was Cochlear Ltd.’s announcement of its financial results, which showed a decline in revenues for fiscal year 2012. Many of us in the industry and the trade press have come to take for granted Cochlear’s steady growth in both unit sales of cochlear implants and sales revenue from year to year. Cochlear total revenues for 2012 were A$779 million, down 4 percent from last year. Although the company points out that revenues were actually up by 1 percent when expressed in terms of common currency, the fact that unit sales of cochlear implants declined 6 percent to 23,087 in 2012—a first for the company—points up the magnitude of the problem.

Most of Cochlear’s shortfall in 2012 is attributable to a recall of its Nucleus CI500 device in September of 2011 [NBR Sep11 p5]. Aside from the hit to the company’s image that the recall caused, about 1,000 units were destocked in the Americas region alone. All told the company took a A$139 million writedown as a result of the recall.

In an open letter to the Australian Sock Exchange this month, Cochlear CEO Chris Roberts reported that 4.2 percent of Nucleus CI500 devices failed at an average time to failure after implantation of 9.3 months. Roberts attributed the failure to a loss of hermeticity, which resulted in the malfunction of components, most likely one of the diodes in the implant. The company noted that a majority of the bad devices were manufactured in the first quarter of 2011, suggesting that the problem was not perpetuating.

Roberts said that both the U.S. FDA and the European Competent Authorities had notified the company that all necessary actions had been completed with respect to return of the unimplanted CI500 devices.

Both the Medtronic warning letter from the FDA and the Cochlear recall of its CI500 devices represented bad news for the neurotechnology industry, especially given that the problems affected two of the largest players in the market. But when a vendor makes an effort to address a problem head-on and provides accurate and honest information to regulators, customers, and the media, this mitigates the long-term damage that might otherwise result.

Of course it’s in the interest of all neurotech device manufacturers to put as much thought into the manufacturing process up front to minimize the chance that product defects will materialize in the first place.

James Cavuoto
Editor and Publisher