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Masimo Corporation (MASI - Analyst Report), a leader in non-invasive monitoring technology for patient care, recently received 510(k) approval from the U.S. Food and Drug Administration (FDA) for its Masimo Signal Extraction Technology (SET) pulse oximeters, rainbow SET Pulse CO-Oximeters, and neonatal sensors. These devices have received specific labeling to be used for screening of infants ailing from critical congenital heart disease (CCHD).
About 3% of all infants die from CCHD in their first year according to the Secretary of Health & Human Services letter to the Secretary's Advisory Committee on Heritable Disorders in Newborns and Children (SACHDNC). Per the Health and Human Services (HHS), 7 to 9 out of every 1,000 babies born suffer from these kinds of heart diseases. Some are detectable and can be treated by measuring the blood oxygen saturation level.
FDA approval has further bolstered Masimo’s foothold in the pulse oximetry space. This is the first time the FDA has approved a particular labeling, signifying the use of pulse oximeters along with a physical exam to test newborns for CCHD. Recently, the state of California made the usage of CCHD pulse oximetry screening mandatory. Earlier, in September 2011, the HHS included pulse oximetry CCHD screening for newborns as part of the Recommended Uniform Screening Panel.
The Radical-7, Rad-57 and Rad-87 Pulse CO-Oximeters with Masimo rainbow SET, and the Rad-5, Rad-5v and Rad-8 Pulse Oximeters with Masimo SET received the 510(k) clearance. The Masimo SET pulse oximeters and sensors had been approved earlier to measure oxygen saturation level and pulse rate during motion and low perfusion conditions in infants.
In addition, along with FDA clearance, Masimo also initiated the HEART Program (Help Ensure Access to the Right Technology). The program will voluntarily provide free Masimo SET pulse oximeters to hospitals which cannot afford to buy it.
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 on its Orthopedic Equipment Manufacturing (OEM) partners for sales. We currently have a Neutral recommendation on the stock, which carries a short-term Zacks #3 Rank (Hold rating).
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