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Recently, Covidien plc.’s (COV - Analyst Report) electroencephalography (EEG)-based monitors, especially the Bispectral Index ("BIS") monitor, was recommended by UK-based National Institute for Health and Clinical Excellence ("NICE"). These devices belong to the company’s Respiratory and Monitoring Solutions product line, and are used to measure the level of anesthesia during surgeries.

The NICE Diagnostics Guidance is supported by reliable clinical proofs and a report by the University of Southampton’s Southampton Health Technology Assessment Centre. Several medical device manufacturers and healthcare institutes also recommended Covidien’s monitors.

The guidance is specifically intended for patients with high risk of deep anesthesia or unintended awareness. Further, the device can be used during general surgeries as well as for patients receiving total intravenous anesthesia.

The recommendation from the prestigious NICE organization should further boost customer confidence in Covidien’s innovative and cost-effective product line. It will benefit the company’s Oximetry and Monitoring business under the core Medical Devices division to expand in U.K. However, the product line faces tough competition such as the E-Entropy and Schiller Narcotrend-Compact M brain monitoring technologies developed by GE Healthcare, a unit under General Electric Company (GE - Analyst Report).

The BIS Brain Function Monitoring Systems are capable of measuring the exact level of consciousness in patients and hence allows anesthetists to provide precise dosage of drugs to suit individual patient’s requirement. This reduces potential risks and enhances patient’s comfort. Some of BIS System’s featured products are the BIS Complete 2-Channel Monitor, the BIS Complete 4-Channel Monitor and the BIS Unilateral Sensors.

With a market-cap of $27.18 billion, Covidien is a leading global health care products company with an impressive history of developing and manufacturing high-quality products in a cost-effective manner. The company boasts a well diversified product and technology portfolio.

However, Covidien faces stiff competition and remains exposed to pricing, utilization headwinds, along with acquisition risks. We remain concerned about the tepid health services industry amid a soft European economy. Also, foreign exchange translation is expected to dampen sales growth.

We currently have a long-term Neutral recommendation on the stock, which carries a short-term Zacks #3 Rank (Hold).

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