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Masimo Corporation (MASI - Analyst Report), a leader in non-invasive monitoring technology for patient care, recently disclosed that IWK Health Centre, a well known Canadian healthcare facility, had adopted Masimo SET pulse oximetry and sensor know-how.   

Over 100 stand alone clinical evaluations have established that Masimo SET technology permits medical practitioners to correctly gauge saturation level of blood oxygen even in difficult situations, such as those involving motion of the patient. IWK’s adoption of Masimo SET pulse oximetry is in line with its commitment to quality of care.     

IWK Health Center is one of east coast Canada’s important healthcare facilities for both tertiary and primary healthcare. The facility is engaged in research work, promotes better living and imparts education to healthcare professionals.    

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.

Another material upside is the rising proportion of recurring revenues on the back of growing installed base. For its SET offering, Masimo continues to surpass the market growth rate with a year-over-year improvement of 11% in its worldwide installed base in the third quarter of 2012. While Masimo’s patented SET offering remains its mainstay, the rainbow measurements represent another growth driver beyond hospital care.

However, the company’s reliance on third-party providers like OEMs for a part of its business and customer concentration raises concern. Additionally, we remain concerned about Masimo’s reliance on group purchasing organizations for the sale of its pulse oximetry products to hospitals in the domestic market.

We also note Covidien’s (COV - Analyst Report) effort to expand its oximetry and monitoring products portfolio. The company recently won U.S. Food and Drug Administration (FDA) 510(k) approval as well as European Economic Area (EEA) CE Mark clearance for its Nellcor Bedside Respiratory Patient Monitoring system.

We currently have a long-term ‘Neutral’ recommendation on Masimo. The stock carries a Zacks #3 Rank, which translates into a short-term Hold rating.

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