Hearing loss – beyond the ‘sound of metal’

Reference to specific stocks should not be taken as advice or a recommendation to invest in them.

I recently watched Sound of Metal, the Oscar-winning story of a heavy-metal drummer, Ruben, who suddenly suffers hearing loss. The film’s sound design allows the viewer to share in Ruben’s experience: aural fog, high-pitched screeches, scratching and scraping sounds. It’s a challenging watch; Spinal Tap it is not. But it is compelling and provides those of us lucky enough not to suffer from hearing loss some appreciation of how debilitating it can be

Unaddressed, the impact of hearing loss can be dramatic. It can create barriers to language and speech development and has negative impacts on cognition (hearing loss is the largest potentially modifiable risk-factor for dementia), education, employment prospects, mental health and relationships. The pandemic hasn’t helped: masks and social distancing have helped to reduce infection rates, but created additional obstacles for people with hearing loss (preventing lip-reading, for example) and led to increased rates of depression.

The size of the problem – and measuring the potential market

The World Health Organisation (WHO) estimates that approximately 430 million people experience hearing loss at a level which, if left unaddressed, would likely have an impact on their quality of life. Meanwhile, around 1.5 billion people – or 20% of the global population – suffer from mild hearing loss. Unsurprisingly, the problem gets worse with age but an estimated 1.1 billion young people are currently at risk from permanent hearing loss due to listening to music too loudly over prolonged period.

Global prevalence of hearing loss (of moderate or higher grade) according to age

Global prevalence of hearing loss chart

Source: World Report on Hearing, World Health Organisation, 2021

All this, of course, also creates a huge economic burden. Costs – in terms of healthcare, education, loss of productivity and societal costs – are estimated to exceed US$980 billion*  annually. So companies that are addressing the problem of hearing loss are hugely impactful. As part of our ‘healthy healthcare’ theme, we currently invest in two hearing-care companies…

Amplifon: a market leader with high intentionality

Italian-listed Amplifon was established in Milan in 1950 by Algernon Charles Holland to provide hearing care for people who suffered injuries during the war. The Holland family retains majority control of the business to this day, ensuring high intentionality and authentic delivery of a corporate mission to “empower people to rediscover all the emotions of sound.” Today, it is the world-leader in hearing-aid sales - by volume, by turnover and in the size of its distribution network.

Amplifon’s strength has historically been its 9,500 hearing-care professionals and more than 11,000 points of sale. Increasingly, however it is the strength of its technology that underpins its offering.

Where Amplifon has introduced its ‘Product Experience’, sales have moved almost exclusively to its cheaper yet technologically comparable private-label devices. These are sold on a subscription basis, making them more affordable and generating recurring revenues for the business. The associated Amplifon app allows users to manage their hearing devices, controlling volume, noise/wind reduction and using AI to create listening programmes tailored for particular environments. Despite recently celebrating its 70th anniversary, Amplifon is still innovating in a highly fragmented marketplace in which it has room to grow: it currently has an 11% market share.

Read our Positive-sum articles

Cochlear: at the cutting edge of restoring hearing

The second company working in this area in which we invest is Australian-listed Cochlear. It was formed in 1981 with finance from the Australian government to help commercialise the cochlear implants pioneered by Dr Graeme Clark. Whereas a conventional hearing aid amplifies external sounds, a cochlear surgical implant bypasses the middle and inner-ear structures to stimulate the auditory nerve directly. As such, cochlear implants are used for treating more severe hearing loss.

The company is the innovator in its market and has been first to market with every key innovation since the inception of cochlear devices. Its achievements include: designing the first multichannel cochlear implant to be approved by the US FDA; being the first to implant a cochlear device; the first to implant a cochlear device in a child; designing the first dual-microphone implant (enabling users to hear a broader array of sounds); the first bone-conduction device and cochlear implants (Nucleus 7) with ‘made for iPhone’ sound processors. Over the past 40 years, Cochlear’s devices have been used to treat over 600,000 patients.

Many of us will have seen heart-rending clips on social media of the reaction of babies when their cochlear implants are activated for the first time. But the benefits of cochlear implant use in children with severe hearing loss are so powerful they should be explicitly stated: a child’s language development is directly related to its hearing ability. And language is essential not just for communication, but also cognitive development, education and the basis for our relationships. For children with severe hearing loss, cochlear implants bring huge benefits, not least a greater likelihood of acquiring oral language, integrating into regular schools and being able to experience ‘the emotion of sound’. The financial benefits of returning a pre-lingual deaf child to mainstream education are equivalent to 13 times every dollar spent on a cochlear implant (based on cost savings in education and improved productivity as an adult). 

In recent years, cochlear implantation has been expanded to adults with severe-to-profound hearing loss. For these individuals, the aggregate societal cost of profound hearing loss ranges between US$392k to US$702k  (depending on age) and results almost exclusively from a loss in work productivity. Cochlear is expanding into this market, where penetration is currently only 3% in developed countries.

The individual, social and economic impacts of hearing loss are profound. Fortunately, with access to rehabilitation and the sorts of technology that Amplifon, Cochlear and a handful of other companies are providing, sufferers can hope to participate more fully in education, the job market and in their communities. We’re proud to be providing them with part of the capital they need to continue to innovate and grow.