Masimo's New Installation

Masimo Corporation (MASI - Analyst Report), a leader in non-invasive monitoring technology for patient care, recently revealed that it placed the Masimo Patient SafetyNet at the University Medical Center of Princeton at Plainsboro, N.J. Among other benefits, this offering from Masimo has proven to cut down on ICU transfers.

The Masimo Patient SafetyNet comprises, among several features, Low Perfusion pulse oximetry and Masimo SET Measure-through Motion. The Masimo Patient SafetyNet monitors the physiological variables of patients and identifies alterations that signal deteriorating health conditions. Upon observing a decline in health status, the system notifies the medical practitioner.

The University Medical Center of Princeton at Plainsboro received a high grade for patient safety from The Leapfrog Group. Of the 2,600 hospitals that were considered, just 25% or so have been awarded an ‘A’ grade.

Earlier, in the second quarter of 2012, Masimo completed the strategic acquisition of PHASEIN AB of Sweden. The purchase price was $30 million. PHASEIN is a provider of sidestream and mainstream capnography offerings. It had sales of about $10 million.

This acquisition provides the company with another set of measurable variables using its know-how. It is expected that earnings per share will be neutral in 2013 and subsequently turn accretive.

Masimo is a market leader in the pulse oximetry monitoring equipment industry. The company’s prospects are encouraging, given the sizeable global market opportunity, adoption of pulse oximetry in non-critical areas of the hospital and growing barriers to entry due to additional non-invasive parameters.

Shipments have been growing at a steady rate fueled by new contracts. However, the renewal of the royalty agreement with Covidien (COV - Analyst Report) provides little or no benefit due to lower rates. Further, competition is intense and Masimo partly depends upon its OEM partners for sales. Our Neutral recommendation is supported by a short-term Zacks #3 Rank (Hold).