) long-established contract for its pulse oximetry system with
North Virginia based Inova Health Systems was renewed recently.
Masimo renewed the contract with one of the largest not-for-profit
health care system in Washington D.C. metro area, binding through
Masimo's pulse oximetry technology and related devices will be
adopted by the five hospitals within the Inova Health System,
including the well regarded Inova Fairfax Hospital. The contract
annexes the company's handheld Rad-57 Pulse CO-Oximeter with the
measurement capabilities of its Rainbow SET. This will enable
clinicians to actively gauge blood oxygen saturation, even under
Inova currently uses Masimo's Radical 7 bedside monitors. These
monitors can be easily upgraded to include measurement capabilities
of Masiomo's Rainbow SET. Inova expects to save time and money via
the technology upgrade. This reiterates Masimo's belief that the
adoption of its technology is economical as hospitals in the U.S.
can save up to $5 billion by optimum utilization of the company's
Masimo enjoys a first-mover advantage for some of its offerings.
The company's SET, the leading pulse oximetry technology worldwide,
along with the Rainbow SET offering underpins its revenue growth.
According to the company, its mainstay SET pulse oximetry will
continue to grow in the years ahead whereas the Rainbow pulse
oximetry will accelerate its top-line as hospitals continue to
adopt Masimo's technologies.
Masimo is a 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
) 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).
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