We consider the inverse problem of reconstructing the interior boundar
y curve of an arbitrary-shaped annulus from overdetermined Cauchy data
on the exterior boundary curve. For the approximate solution of this
ill-posed and nonlinear problem we propose a regularized Newton method
based on a boundary integral equation approach for the initial bounda
ry value problem for the heat equation. A theoretical foundation for t
his Newton method is given by establishing the differentiability of th
e initial boundary value problem with respect to the interior boundary
curve in the sense of a domain derivative. Numerical examples indicat
e the feasibility of our method.